Student Debt Crisis Your One Stop Hub For Student Debt Issues Tue, 04 Aug 2015 17:17:56 +0000 en-US hourly 1 Are Big Changes Coming to Student Loan Bankruptcy Rules? Tue, 04 Aug 2015 17:17:56 +0000 Student loans are for life. Unlike virtually every other type of consumer debt – car loans, credit card debt, medical bills – you can’t escape from educational debt by declaring bankruptcy. At least, that’s the conventional wisdom. Recently, however, there have been some signs that it might eventually get a little easier for people who are burdened by unmanageable student loans to find relief through the bankruptcy process.

A handful of federal judges who handle bankruptcy cases have indicated they think the current standard, which only permits educational debt to be discharged if it is causing the borrower “undue hardship,” needs to be reconsidered, the New York Times reported. One, Jim D. Pappas, a judge in the U.S. Bankruptcy Court’s Idaho District, noted in a 2013 opinion the current method of determining whether student loans are too burdensome “is too narrow, no longer reflects reality and should be revised…a bankruptcy court should be afforded flexibility to consider all relevant facts about the debtor and the subject loans.” He’s not alone in his concerns, and several other bankruptcy court judges have expressed their concerns over they way these cases must be handled.

Currently, judges usually apply what is known as the “Brunner test” when determining whether a person’s student loans qualify as an undue hardship. To pass the test, a borrower’s loans must prevent them from maintaining a reasonable standard of living, their financial situation must be unlikely to change in the future, and they must have made a good-faith effort to repay their debt. That, as many borrowers have discovered, is a very high bar to meet…

Continue Reading at Cheat Sheet…

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There’s a bipartisan new approach to curbing student loan debt, but it’s pretty controversial Tue, 04 Aug 2015 17:14:23 +0000 The race to solve the student debt crisis continues, with even more pressure mounting in the buildup to the 2016 presidential election.

Things have gotten so crazy, that for one proposal, the rare feat of bipartisanship may even be on the horizon.

According to Wonkblog’s Danielle Douglas-Gabriel, “a coalition of liberal and conservative lawmakers” are pushing for a new plan that would “force colleges to pay up when their students default.”

Essentially, what these lawmakers are hoping is that by putting some of the burden of default onto the universities themselves, schools would feel more of a responsibility to make sure their students have the proper counseling and help they need to pay back their loans. Schools might also be more vigorous in promoting certain scholarships that go unused, or provide training on how to better manage student loan debt.

Such a proposal has been in the works, in some form or another, according to Douglas-Gabriel, since 2013, when a bill was proposed that would require schools with default rates over 15 percent to “reimburse the government 5 percent of the total defaulted debt,” Douglas-Gabriel explained. “The higher the default rate, the higher the penalty.”…

Continue Reading at Deseret News…

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Citibank investigated over its student loan services Tue, 04 Aug 2015 17:07:09 +0000 It’s tough to pay back student loans, particularly if your bank is inflating your monthly bill or giving out misinformation.

Weeks after Discover was ordered to pay $18.5 million for doing just that, Citibank says it is facing a probe into its own student loan services.

Citibank did not disclose in a regulatory form it filed Monday what agency is conducting the investigation, but a person familiar with the matter confirmed that it is being done by the Consumer Financial Protection Bureau.

It was the CFPB that penalized Discover in July for overstating the minimum amount due on bills, misrepresenting how much interest some students had paid, and engaging in aggressive and sometimes illegal collection practices.

It’s unclear which of Citibank’s student loan practices the CFPB is looking into. The CFPB said only that it does not comment on its current investigations.

In May, the federal agency launched a public comment period concerning student loan services.

Read More at CNN Money…

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Parents Save For Kids’ College Despite Carrying Student Debt Tue, 04 Aug 2015 17:03:20 +0000 WASHINGTON, Aug. 4, 2015 /PRNewswire-USNewswire/ — One-third of parents are still shouldering student debt but are determined to change that for their children and are choosing savings to finance their college. The majority, 51%, of parents responding to the 9thAnnual College Savings Foundation State of College Savings Survey said savings is their number one strategy for funding their children’s college costs, up from 45% last year, and ahead of loans; grants, scholarships or aid; and current income.

Overall, there was an upswing in parental saving:  53% of all parents are saving; and nearly half, 48%, have saved at least $5,000 per child.  Parents used these tools to help them along:

  • 33% of parents own a 529 college savings plan.
  • 42% use automated monthly savings plans, up from 38% last year; and 67% save more than $100 a month in them.
  • 51% would ask family or friends for college savings instead of a material gift.

“We are encouraged to see parents across generations avidly saving for their children’s college and that their own student debt is a motivator – not a deterrent – to saving,” said Mary Morris, Chair of the College Savings Foundation – a leading nonprofit helping American families save for their children’s college education.  In the survey, 82% of parents with college debt said it had made them consider other strategies for their children…

Continue Reading at PR Newswire…

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Philadelphia Fed: Massive student loan debt is hampering entrepreneurship, hurting economy Thu, 30 Jul 2015 16:37:50 +0000 A Federal Reserve Bank of Philadelphia study shows that the rise of student debt correlates to a decline in U.S. small business formation.

Fed researchers found that small firms consisting of one to four employees decreased by 17 percent in counties where relative student debt grew by about 2.7 percent.

Across the country, these small businesses account for about one-half of the private sector economy and 99 percent of all businesses.

The stymying effect derives from the inability of those who wish to start a business to access capital in the form of more debt. The study cites a 2004 survey of startup firms, which says the smallest businesses with zero employees need average financing of $44,793, more than half of which comes in the form of debt.

One Greater Philadelphia startup has dealt with the potholes of student debt.Ryan Owen, the chief executive officer of Hazleton-based MeetBall, said he waited longer than he would have to start a company if he didn’t have any student debt…

Read the Entire Article at BizJournals…

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Love vs. Loans: How Student Debt Sabotages Relationships Thu, 30 Jul 2015 16:10:39 +0000 For many millennials, love and marriage come with a hefty, and often stressful, piece of baggage: student loans.

Money and financial disagreements are the biggest cause of divorce in the United States, according to The College Investor. As most married couples can attest, it’s difficult enough to figure out joint finances without having the added complication of student loan debt, especially if one partner has significantly more debt.

Debt sometimes even prevents couples from getting hitched. A National Foundation for Credit Counseling survey found that 54 percent of people would either not marry until their partner’s debt was paid in full (37 percent), marry but not assist their partner in paying their debt (10 percent), or end the relationship all together (7 percent). The remaining respondents (46 percent) said they would proceed with getting married and work together to pay off the debt.

Continue Reading at Yahoo! Finance…

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Do We Need to Rethink How We Pay for College Sports? Wed, 29 Jul 2015 17:48:43 +0000 College athletics are justified, almost invariably, by the assumption that they’re hugely profitable. On the surface, the assumption seems reasonable enough. Sports bring in revenue from ticket sales, food and beverage sales, television network deals, donations, merchandising, and more. The money that gets brought in goes back into the athletic department and some money goes to the university for educational purposes.

This is a myth. In 2013, out of the 342 schools that competed in Division I intercollegiate athletics, only 20 schools reported a profit, meaning 94.2% of schools lost money on sports. In addition, 91.9% of Division I schools with a football program also reported a net loss…

Continue Reading and Watch the Video at Blue Nation Review…

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Teacher Discharges Loads of Student Loans in Bankruptcy, ECMC Fights Back. Wed, 29 Jul 2015 16:36:31 +0000 Today I’m looking at another bankruptcy discharge case, see more here, where a bankruptcy judge felt it was appropriate to allow for a legal discharge of student loan debt. In this case the consumer represented herself in the action and has fought a valiant battle.

Even though President Obama and the Department of Education have recognized a valid and reasonable allowance for people to legally discharge student loan debt, see this article, apparently Educational Credit Management Corporation feels they have a duty to say otherwise.

Acosta-Coniff v. ECMC

Rather than rehash all of the initial documents in this case fought by the consumer herself, let’s just look at what the bankruptcy court judge had to say after reviewing the facts.

On March 25, 2015 the United States Bankruptcy Judge ruled “Conniff is indebted to ECMC for student loans in the amount of $112,000. Based upon her circumstances, she cannot maintain even a minimal standard of living if she is required to repay the loan. It was established that her circumstances will persist into the forseeable future.Moreover, Conniff has shown that she has made a good faith effort to repay her loan. Therefore, requiring Conniff to repay the loan would impose an undue hardship on her and this renders the loan discharged.” – Source

Acosta-Conioff (Coniff) is yet another case where a judge looked at the individual circumstances of a student loan debtor and felt that the person would be left in a worse financial position heading into retirement if the loan were not discharged. Seethis article for another case.

Undue Hardship

Coniff made the argument before the judge that based on her specific facts, asking her to continue to be burned with the overwhelming student loan debt would pose an undue hardship…

Read the Entire Article at Huffington Post…

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Federal Student Loans Help Now, Hinder Later Wed, 29 Jul 2015 16:05:57 +0000 Federal student loans are a controversial subject these days. Once viewed as the saving grace for individuals who could not afford the astronomical cost of college, we have now learned that once the required semesters are complete, students find themselves swimming in debt due to federal student loans.

Presidential candidate, real estate mogul, and reality TV star Donald Trump has taken a firm stance on federal student loans. Known for his ability to make money hand over fist, Trump says the federal government should not be making money off student loans. In an interview with the Hill, he spoke about the financial stress many college students are feeling.

“One of the biggest questions I get is from people in college [about student loans]. They’re in college — they’re doing well but they’ve got student loans up to the neck. They’re swimming in these loans.

That’s probably one of the only things the government shouldn’t make money off — I think it’s terrible that one of the only profit centers we have is student loans.

I’ll see so many young people and they work really hard for four years. They borrowed money. Their parents don’t have much. They work all together and they mortgage their future.

They get good marks — I’m not even talking about the ones that are at the bottom, I’m talking about the ones at the top. They can’t get jobs and they don’t know what to do.”

If the top ranking students are having such a difficult time after graduation, we can only imagine how the lower performing students manage to find work and pay off their student loans…

Continue Reading at Inquisitr…

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Discover Slammed By CFPB For Illegal Student Loan Servicing Practices Thu, 23 Jul 2015 18:24:50 +0000 When it comes to student loans, information is paramount: Borrowers need to know what their minimum monthly payment is and when it is due; they need to know the interest rates on their loans and how much they are paying in interest each year; and they need to know the total amount they owe and when they can expect to have repaid their debt in full. It is up to student loan servicers to provide this information — ideally, in a clear and understandable way. But according to the Consumer Financial Protection Bureau, one major student loan servicer not only failed to make some of this information clear and understandable, they failed to provide it at all.

The Consumer Financial Protection Bureau announced Wednesday that it is taking action against Discover Financial Services DFS -3.9% for illegal student loan servicing practices, charging it $18.5 million and ordering the company (and its affiliates) to clean up its billing, interest reporting and collection practices. This action follows a CFPB investigation that found that Discover overstated the minimum amounts due on billing statements, failed to provide student loan interest information required for certain tax benefits, and engaged in illegal debt collection practices by calling borrowers early in the morning or late at night…

Continue Reading at Forbes…

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