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Entries in Student Loans (28)

Sunday
Jun232013

What Happens to Student Loan Debt After Death?

JupiterImages/Comstock Images(NEW YORK) -- If the borrower of a student loan dies, is the spouse liable for that loan? The answer is: it depends.

With traditional loans, as long as the spouse is not listed as a co-signer or joint account holder, he or she is not legally liable for the debt -- unless you live in a community property state.

If you live in a community property state and your spouse dies, you're typically liable for your spouse's debt, regardless of whether your name was on the original loan or not. Community property states include Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. Alaska has an optional community property provision for couples who choose to opt into a community property agreement.

With student loans, however, the rules are a little different and a spouse's liability will depend on the type of student loan, whether or not you live in a community property state and your individual state laws.

If the student loan is a federally backed education loan, a spouse is safe from repayment liability. According to the U.S. Department of Education, if the borrower of a federal student loan dies, the loan is automatically canceled and the debt is discharged by the government. Unfortunately, private student loans do not offer the same liability protections.

With private student loans, on the other hand, liability in the event of a spouse's death will depend on the individual private lender's policies. With a private student loan, it would be a good idea to check with the private lender to find out if they offer any death discharge protections.

Sallie Mae's Smart Option Student Loan, New York HESC's NYHELPs loans, and WellsFargo private student loans all offer death and disability forgiveness policies, but that isn't the norm for most private lenders.

For most other private student loans, the lender will first attempt to collect from the borrower's estate. If there is no estate, it will attempt to collect from a co-signer if one exists, then it would fall to the spouse, but it will depend on the community property laws in your particular state. Many community property states offer exceptions for education debts so that the spouse isn't held liable for the debt unless they co-signed the loan.

If you live in a community property state, it's worth checking into the laws to confirm whether or not your state has an exception. However, if you're not a co-signer, and you do not reside in a community property state, you're off the hook.

As a final word of warning, you should also be aware that there may be tax repercussions on forgiven debts -- even on student loans that are canceled due to death or disability.

Copyright 2013 ABC News Radio

Saturday
Apr132013

Student Debt Impacting US Economy

JupiterImages/Comstock Images(NEW YORK) -- According to a recent study, students should consider the statistics before taking out a loan to help pay for college.

Two-thirds of students take out loans to pay for college, and their combined debt could have a broad impact on the housing market and overall economy, according to new analysis from the Center for American Progress.

This is because people are taking out more loans than they used to, but their ability to pay them off hasn't kept pace. CAP notes that banks have written off billions of dollars and approximately 850,000 former students have defaulted on loans just in the first few months of 2013.

People used to take out loans, go to school, get jobs and pay off their debt in a reasonable amount of time. However, rising college costs paired with a struggling economy and high unemployment among young people has made that difficult.

In particular, Latinos and African-Americans are more likely to take out private student loans than in the past. That can be problematic because private loans often carry higher interest rates and repayment plans are less flexible than federal loans.

Many people now graduate and return home to live with their parents -- sometimes without a job -- which means they aren't buying their own homes. Home ownership rates among young people are at some of the lowest points in decades. Minorities, who are more likely to be burdened with student debt, are expected to represent more than 70 percent of net household growth between 2010 and 2020, CAP notes, but student debt could undermine that figure.

"By 2020, California real estate brokerage Movato.com predicts that half of all new homebuyers nationwide will be Latino—assuming Latino families are able to get mortgages," the think tank wrote in a letter to the Consumer Financial Protection Bureau this week.

The housing market isn't the only thing impacted by rising student debt.

As CAP notes, according to the Center for Retirement Research at Boston College, 62 percent of workers in their 30s likely will not have enough resources when they retire. That figure is particularly scary because it's gone up nine points in just three years, 2007 to 2010. It's hard to save for retirement when you're still trying to pay off loans, and nearly one in five people in their 30s has more than $50,000 in student-loan debt.

Complicating the issue is the fact that interest rates on some federal student loans are set to double on July 1. While the general consensus in Washington is that that's not a good thing, opinion on what should be done is anything but unanimous.

President Barack Obama on Wednesday proposed tying interest rates for federal student loans, which are currently fixed, to the government's cost of borrowing.

Three Republican senators recently introduced a bill that would set fixed interest rates on newly issued federal student loans, which would be pegged to the Treasury's 10-year borrowing rate, plus an additional three percentage points.

CAP suggests developing a refinancing program for student-loan borrowers and increasing income-based repayment programs, which would allow people to make payments based on their income instead of a predetermined rate. The organization also wants schools to certify private student loans.

Whatever is done, CAP warns that without action, "the growing student loan burden could make it more difficult for families to achieve future financial security and, if unchecked, could negatively affect the housing market and the broader economy."

Copyright 2013 ABC News Radio

Thursday
Feb282013

Could the Sequester Impact Your Student Loans?

JupiterImages/Comstock Images(WASHINGTON) -- While Republicans and Democrats fight over how to deal with the automatic budget cuts that start Friday, the sequester will almost certainly mean cuts to programs for college students.

That includes cuts to some federal work-study programs and reductions in payments to millions of student loan borrowers, although the exact detail and timeline remain unclear.

During the White House briefing Wednesday, Secretary of Education Arne Duncan warned of the dire effects sequestration could have on federal higher education funding.

“That ($86 million cut) would mean for the fall as many as 70,000 students would lose access to grants and to work-study opportunities,” Duncan said during the briefing. “And if young people lose access to grants and lose access to work-study, my fear … is many of them would not be able to enroll in college, would not be able to go back. And, again, do we want a less-educated workforce?”

Though funding for federal Pell Grants are protected from sequestration, funding for federal work study grants would be cut by $49 million and supplemental educational opportunity grants by $37 million, according to the Department of Education.

In a Feb. 1 letter to the U.S. Senate on Committee Appropriations, Duncan also noted that the ability for the Department of Education to collect and service student debt to borrowers once they left school “would be hampered” by the cuts.

For U.S. Student Association President Tiffany Letin, who graduated with nearly $28,000 in student loan debt, the cuts are detrimental to the future of higher education funding.

“President Obama came out in his state of the union address and inauguration speech saying we should support students financially,” Letin said. “But the sequestration and budget contradict this – our states don’t get the funding they need to have lower costs for textbooks and keep faculty and staff at our colleges and universities.”

The association will be holding a national conference in Washington, D.C. with more than 350 students from March 14 to 18 to discuss student loan debt and issues regarding undocumented students. Students will practice effective lobbying and put their skills to the test on March 18 by rallying for better funding for higher education.

Copyright 2013 ABC News Radio

Friday
Dec212012

Graduates, Parents Riddled with Student Debt Turn to Bankruptcy

The Bryski Family(PALMDALE, Calif.) -- A mourning father in California finally resolved his dead son's student loan debts more than four years with an exhausting journey through the courts and other maneuvers.

Francisco Reynoso, 57, of Palmdale, Calif., is a self-employed gardener. His son, Freddy, died in a car accident on Sept. 5, 2008 after graduating from the Berklee College of Music in May 2008.

The $200,000 in loans that he co-signed became due two months after his son's death, which the Reynosos tried to pay with their $20,000 a year income. While their son's federal loan through the U.S. Department of Education was voluntarily discharged due to Freddy's death, the only recourse for the Reynosos to discharge his private loans was through legal means.

With only a second grade education from Mexico, Garcia only speaks Spanish and makes $1,573.33 a month. His wife was laid off from her job as a machine operator in 2003, went to cosmetology school in 2009 but has struggled to find employment.

Erik Clark, an attorney for Reynoso, said private student loan debt is "blowing out of control" and lawyers are unlikely to want to take on legal cases involving the issue.

"We hardly ever take them," Clark said about student loan legal cases.

There are various laws and guidance for lenders, but a family in New Jersey is searching for a member of Congress to reintroduce a bill that would encourage more transparency when a family member co-signs a student loan.

More than six years after Christopher Bryski died from a traumatic brain injury, and two years after the late Rep. John Adler, D-N.J., introduced the Christopher Bryski Student Loan Protection Act in 2010, the Bryski family is hopeful Christopher's Law, as they call it, will be re-introduced in the next session starting in January.

Last April, the private lender forgave the remaining $30,000 or so of Christopher Bryski's loans that his father had co-signed.

In July 2011, the Federal Trade Commission released guidelines around debt collection for those who have died. In July 2011, the Federal Trade Commission released guidelines around debt collection for those who have died, saying contacting a relative other than the deceased person's spouse, parent or guardian – if the person is a minor – when they have no legal obligation to pay the debt, may be violating the FDCPA. The FTC also explained how a debt collector can avoid engaging in deceptive practices in communicating with a third party about a decedent's debts.

The Fair Debt Collection Practices Act (FDCPA) of 1996 amended the Consumer Credit Protection Act to prohibit abusive practices by debt collectors.

In order for a lender or family of a deceased borrower to discharge private student loan debt, they often file for bankruptcy in hopes that a judge will deem that the student loan imposes an undue hardship on the debtor.

"It's unlikely a client who has undue hardship will have the funds to pay attorneys for the work that goes into this. Nobody is going to get rich trying student loan cases," Clark said.

Reynoso filed for bankruptcy on April 20, 2012 in his quest to prove "undue hardship."

"While that standard doesn't sound high, it is actually very high, which is why these cases are so difficult to proceed with," Clark said.

Reynoso and Clark had to deal with a complicated paper trail of his son's loans, as reported by ProPublica. The first loan was from Bank of America. It was later sold to First Marblehead's National Collegiate Trust, which didn't respond to Reynoso's lawsuit. Fortunately for him the judge then awarded him a default judgment.

"It was not great lawyering on our side. They just didn't respond," Clark said.

The larger part of the loans passed through the Swiss bank UBS and then was acquired by the Swiss central bank during the financial crisis. StabFund ultimately settled with Reynoso, said his attorney, though he can't discuss the terms of the agreement.

StabFund did not respond to a request for comment.

Clark said Reynoso is off the hook after a long effort, but unless there are changes in public policy or greater awareness about student loans, graduates--or their heirs--loaded with unaffordable debt have little recourse but to file for bankruptcy to "get creditors off your back."

"The vast majority of people we're seeing have enormous student loan debt and can't get employed," he said. "They are 40 or 50 years old who go back to school for master's degrees that earn nothing. They will never pay this off."

Copyright 2012 ABC News Radio

Thursday
Nov292012

Mom Inherits Dead Son’s Student Loans, Petitions to Have Them Forgiven

JupiterImages/Comstock Images(NEW YORK) -- Three years after her son’s death, a 61-year-old Michigan woman is still on the hook for his student loans -- and a Change.org petition she started now has nearly 200,000 signatures demanding the companies forgive the loans and change their policies.

Jermaine Edwards went to college to study music production, and his mother, Ella Edwards, agreed to cosign his student loans to help him attend school.  However, Jermaine died of natural causes in 2009 at age 24, leaving his mother responsible for the loans.

“That’s when American Education Services (AES) and National Collegiate Trust (NCT) turned my son’s dream into a nightmare for me and the two year old son he left behind,” Edwards wrote in the petition.

Jermain had three student loans when he died, two federal and one private.  The two federal government loans were forgiven within a month of his death.  However, the private loan company is refusing to forgive the loan.

“He was paying the loan bills when he died, but the balance is still over $10,000, and if I’m ever a couple days late on a payment, the calls keep coming until I pay,” Ella told ABC News.

Ella wrote in the petition that she was so depressed after her son’s death that she could barely get out of bed, and has since been under doctors’ care.  She requested an early retirement, but is now back working.  The money is still not enough to cover the bills.

“I am 61 years old and I have been trying to work to make Jermaine’s loan payments…but I simply don’t have the money,” Ella wrote.  “To make matters worse, Jermaine left behind a young son whose mother doesn’t have many resources.  Therefore, she relies on me to help support Jermaine’s son.”

The petition directed to the institutions includes a letter calling for forgiveness of the loan.

“I’m horrified at your institution’s practice of hounding a dead student’s family for repayment of student loans he’ll never get a chance to use,” the letter reads.  “I’m calling on you to do the only humane thing -- let this still-grieving mother mourn the loss of her only son in peace.  I stand with the Ella Edwards family and decent people everywhere in demanding that you discharge Jermaine Edwards’ student loan debt today.”

Ella told ABC she decided to start the petition to demand a change in the laws surrounding student loans, and to warn other parents what they might be getting into if they take out a private loan.

“I suffer every day, and I started the petition because I don’t want any other mom to suffer like I am,” she said, through tears.  “People need to be aware these private loan people will come after you like a shark.  I would advise people never to get a private loan until the law changes.”

The loan companies have not returned calls for comment from ABC News.

Copyright 2012 ABC News Radio

Thursday
Oct182012

Report: Burden of Debt Continues to Grow for College Students

JupiterImages/Comstock Images(NEW YORK) -- The burden of debt for college students who take out loans continues to rise, according to a new report out Thursday.  

“Two-thirds of new graduates had loans and their average debt was $26,600 dollars for the class of 2011,” says Lauren Asher, president of the California-based Institute for College Access and Success.

[ CLICK HERE TO SEE THE FULL REPORT ]

She says average debt for college students who graduated last year rose more than $1,000, compared to the year before.

“College costs have outstripped both family incomes and available grant aid now for quite awhile and that shows up in more and more debt,” Asher says.

By some estimates, student loan debt in the U.S. has grown to over $1 trillion.

Copyright 2012 ABC News Radio

Friday
Oct052012

Sarah Lawrence Tops List of Most Expensive US Colleges

iStockphoto/Thinkstock(NEW YORK) -- A college degree may be losing its value, but the price tag for a four-year education continues to rise.

The cost to attend college for one year exceeded $60,000 for the first time this year, according to Campus Grotto, a college publication that compiles an annual list of the most expensive colleges.

Tuition at more than 70 colleges is more than $55,000, according to Campus Grotto, and the sticker price often makes it necessary for students to seek financial assistance through student loans and other means.

Last year, the total student debt surpassed $1 trillion.

According to a report from the Pew Research Center, nearly one in every five U.S. households is saddled with student loan debt.

The Pew Report found that 40 percent of all households headed by those younger than 35 had student loan debt. Among households owing on student loans, the average outstanding loan balance increased from $23,349 in 2007 to $26,682 in 2010, according to the Pew Research Center.

In the meantime, the cost of a college degree continues to climb.

This year the cost to attend the most expensive college, Sarah Lawrence College, for one year was  more than double the average outstanding loan balance in 2010. The private college in New York’s Westchester County charges its students $61,236 a year for tuition, room and board and fees.

Here’s Campus Grotto’s list of the top 10 most expensive colleges:

1. Sarah Lawrence College
Total Cost: $61,236

2. New York University
Total Cost: $59,837

3. Harvey Mudd College
Total Cost: $58,913

4. Columbia University
Total Cost: $58,742

5. Wesleyan University

Total Cost: $58,202

6. Claremont McKenna College
Total Cost: $58,065

7. Dartmouth College
Total Cost: $57,996

8. Drexel University
Total Cost: $57,975

9. University of Chicago

Total Cost: $57,711

10. Bard College
Total Cost: $57,580

Copyright 2012 ABC News Radio

Thursday
Sep272012

Student Loan Debt Weighing Down the Young and Poor

JupiterImages/Comstock Images(NEW YORK) -- Millions who've gone to college say they owe a lot to their education.

Unfortunately, millions still owe a lot for their education, with close to 20 percent of all U.S. households saddled with student loan debt as of 2010.

That's over double of what it was 20 years earlier, with most of the crushing burden of debt having fallen on the backs of those who are young, poor or both.

In 2010, the Pew Research Center computed that the average outstanding debt was nearly $26,700 and the total owed nationally as of earlier this year was $914 billion.

These mountains of IOUs are based predominantly on two factors: college tuition that easily outpaces the annual rate of inflation and federal government borrowing limits now exceeding $30,000, compared to a ceiling of $7,500 during the 1960s.

Since those on the top rung of the income scale send more people to college, they hold almost a third of the debt.

However, the poor owed a far greater share of what they earned since student debt eats up a quarter of the lower fifth's yearly income.

Meanwhile, heads of households under the age of 35 account for 40 percent of the student debt, a staggering jump from 17 percent in 1989.

Copyright 2012 ABC News Radio

Friday
Aug172012

More Social Security Money Withheld Because of Unpaid Student Loans

Comstock/Thinkstock(NEW YORK) -- About twice as many Social Security recipients are not receiving all of their Social Security payments this year because they have unpaid federal student loans, according to a report by SmartMoney.com.

According to a 1996 law, the federal government has the authority to withhold portions of Social Security payments if defaulted debt is owed to the government, including federal student loans.

“It’s quite extraordinary because normally Social Security benefits can’t be touched by creditors,”  said Deanne Loonin, a staff attorney with the National Consumer Law Center.

From January through Aug. 6 of this year, the government reduced the size of about 115,000 retirees’ Social Security checks, almost double the department’s enforcement in 2011, according to data from the Treasury Department.  In 2007, there were 60,000 cases and in 2000, there were only six cases.

While the amount that the government withholds can vary, at least $750 a month must be left untouched.

“When you think about it, $750 a month is less than the poverty line.  It’s not a lot of money for people to have,” said Loonin.

Loonin said she has worked with people who are often older and have their Social Security benefits withheld.  They are delinquent on a range of loans, including those federal student loans parents took out for their children.

Many federal loans allow borrowers to request a reduction in loan payments or suspension based on hardship, such as total permanent disability.

The National Consumer Law Center in Boston has set up a website to assist borrowers to avoid default and to outline steps to take if they do default on a loan.

Copyright 2012 ABC News Radio

Monday
Jul232012

Lax Student Loan Standards Created Debt Crisis, Report Finds

JupiterImages/Comstock Images(NEW YORK) -- Lax loan standards have left many college graduates struggling to repay private student loans, according to a new study.

A report by the Consumer Financial Protection Bureau (CFPB) and the Department of Education found that the private student loan market grew from less than $5 billion in 2001 to over $20 billion in 2008.  In 2011, the figure declined to less than $5 billion as banks began to tighten credit standards and the number of undergraduates with co-signers hit a high of 90 percent.

“Students were yet another group of consumers that were hurt by the boom and bust of the financial crisis,” wrote CFPB director Richard Cordray in a statement.  “Too many student loan borrowers were given loans they could not afford and sometimes for more money than they needed.  They are now overwhelmed by debt and regret the decisions they made.”

From 2005 to 2007, the report found that school involvement in student loans began to shrink and students began borrowing more than necessary.  And, lenders began making exceptions for students with lower credit scores.

Private lenders gave out money without considering whether borrowers would repay, then bundled and resold the loans to investors to avoid losing money when students defaulted.

Impacted by the recession, in 2009, the unemployment rate for private student loan borrowers who began college during the 2003-2004 academic year stood at 16 percent.  The amount of defaults has grown since then.  According to the report, cumulative defaults on private student loans grew to more than $8.1 billion, and represents more than 850,000 distinct loans.

For many students, student loans are necessary to fund the college experience.  The report found that in 2008, 42 percent of for-profit undergraduates received a private student loan, while only 16 percent of all undergraduates used a private student loan.

In 2011, over 90 percent of private students loans had a co-signer, up from 67 percent in 2008.

“After the financial markets crashed, some common-sense practices returned.  Without investors willing to buy risky loans, lenders were forced to care more about a borrower’s ability to repay," wrote Cordray.

“Now, most lenders make sure that students are not borrowing more than they really need when issuing a private student loan,” he wrote.

Student loan debt has grown to over $1 trillion by some estimates.  Meanwhile, college tuition has doubled in the price in the last decade.

Copyright 2012 ABC News Radio







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