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Student Loans

Student Loans: 100 Days Under President Trump

Will President Trump make student loans great again?

As President Trump marks his first 100 days in office, it’s helpful to recap the latest developments that will impact your student loans.

According to Make Lemonade, there are over 44 million borrowers with over $1.3 trillion in student loan debt, and the average student in the Class of 2016 has $37,172 in student loan debt.

Here’s what you need to know to help you make more informed decisions regarding student loan refinance, student loan consolidation, student loan repayment and student forgiveness.

Potential For New Income Repayment Plan

Last October, then-candidate Trump proposed an income-based repayment plan that would allows borrowers to cap their monthly student loan payments based on their income, and then have their student loans forgiven after a certain period of time. Today, the standard federal government student loan repayment period is 10 years.

Under Trump’s proposed plan, if you are a student loan borrower, your monthly student loan payments would be capped at 12.5% of your income. After 15 years of monthly payments, your remaining student loan debt would be forgiven.

While Trump’s proposal would raise the monthly payment cap from 10% to 12.5% of income, his proposal would forgive the remaining student loan balance five years (undergraduate loans) to 10 years (graduate student loans) sooner than the current income-driven repayment plans.

Action Step: This plan was proposed during the presidential campaign, but is not currently available yet to student loan borrowers. Stay tuned.

The Fate Of Public Service Loan Forgiveness

The Public Service Loan Forgiveness Program is a federal program that forgives federal student loans for borrowers who are employed full-time (more than 30 hours per week) in an eligible federal, state or local public service job or 501(c)(3) non-profit job who make the majority of 120 eligible on-time payments under an income-driven repayment plan.

There are only two types of federal student loans that qualify: Direct Loans (such as Stafford Loans) and a Federal Direct Consolidation Loan. Therefore, private student loans are not eligible.

What is the future of the Public Service Loan Forgiveness Program?

There are several different possibilities: the program could be continued, modified, eliminated or folded in to a new repayment plan program.

If Congress were to eliminate Public Service Loan Forgiveness (and place all borrowers into a single income-based repayment program), for example, existing borrowers likely would be grandfathered in, since they borrowed with the expectation of entering public service and qualifying for loan forgiveness. Alternatively, for example, the amount of loan forgiveness or eligible fields could be restricted.

Action Step: If you currently work in public service, ensure that you are making 120 consecutive monthly payments, and that you work in a qualifying public service job. If you are a current student, it is possible that the program may not exist at the end of your 10 years of public service employment. Be mindful of this possibility as you plan your career.

Student Loan Forgiveness Letters May Be Invalid

As first reported by the New York Times, however, a student loan borrower’s acceptance into a federal student loan forgiveness program may not be binding and could be rescinded by the U.S. Department of Education.

In a legal filing March 23, the Education Department said that student loan borrowers could not rely on the approval letters sent by the program’s administrator, FedLoan Servicing, because any approvals are considered tentative.

Although not required, you should submit (in addition to your monthly student loan payments) the Public Service Loan Forgiveness Employment Certification Form annually or whenever you change jobs to help you track your progress toward meeting the program’s eligibility requirements.

Then, you should submit the form and employer’s certification to FedLoan Servicing, which is the U.S. Department of Education’s student loan servicer for the program. FedLoan Servicing will inform you if you are eligible, how many qualifying student loan payments you have made, and how many qualifying student loan payments remain for you to qualify for Public Service Loan Forgiveness.

Action Step: Your public service role and employer matter, if you want to qualify for Public Service Loan Forgiveness Program. While the program includes employment at a 501(c)(3) non-profit organization, not every non-profit or type of employment qualifies. Keep that in mind when considering Public Service Loan Forgiveness, your employer and position.

 More Fees For Student Loan Borrowers In Default

In a two-page “Dear Colleague” letter, the U.S. Department of Education asked guarantee agencies to disregard a July 2015 memorandum issued by the Obama administration that forbid the agencies from charging up to 16% of the principal and interest accrued on student loans if the borrower entered the government’s student loan rehabilitation within 60 days of default.

As a result, loan guarantee agencies that collect on defaulted debt can charge borrowers who have defaulted on their federal student loans fees up to 16% on their student loan balances – even when these borrowers promise to make good on their student loans within 60 days.

These fees only applies to you if your student loan is in default and you borrowed a federal loan prior to 2010 through the Federal Family Education Loan (FFEL) Program. Although the FFEL program has not issued a new loan since 2010, according to Make Lemonade, approximately 7 million borrowers with $162 billion in FFEL student loans held by guarantee agencies could be impacted.

Action Step: Your best option is to consolidate your student loans. When you consolidate your FFEL student loans into a Direct Consolidation Loan, you can be protected by the 60-day grace period.

Navient’s Take On Its Student Loan Lawsuit

If you have a student loan, there is a good chance that it may be serviced by Navient, the nation’s largest student loan servicer.

In a lawsuit filed against Navient in a Pennsylvania federal court in January, the Consumer Financial Protection Bureau (CFPB) alleged that, among other allegations, Navient “systematically and illegally [failed] borrowers at every stage of repayment.” As this lawsuit was filed by a government agency (the CFPB), it is not a class action lawsuit and therefore individual litigants cannot participate.

In a statement, Navient denied all allegations and said the lawsuit was politically motivated. In March, Navient filed a motion to dismiss the case, and argued that it is not a fiduciary financial advisor.

According to Navient, Navient’s relationship with borrowers is that of an arm’s-length student loan servicer.

Navient says its role is to collect payment owed by borrowers – and in this role, “the servicer acts in the lender’s interest,” and there is “no expectation that the servicer will ‘act in the interest of the consumer.'”

Action Step: There is more to come in this ongoing case, including the role of student loan servicers. Is their role to advise student loan borrowers, or is their role only to collect and process student loan payments?

Additional Action Steps

What additional action steps can you take?

1. Understand all your student loan options

Get empowered and stay on top of your student loans. Don’t rely on your student loan servicer to have all the answers. Do your homework and understand your options:

  • Student Loan Refinancing
  • Federal Student Loan Consolidation
  • Income-Driven Repayment Plans
  • Student Loan Forgiveness2. Contact the Consumer Financial Protection Bureau

    If you want to file a formal complaint regarding your student loan lender or student loan servicer, contact the Consumer Financial Protection Bureau.

    The CFPB supervises financial services companies and enforces federal consumer financial laws. Once you submit a complaint to the CFPB, the CFPB will forward your complaint to the student loan company or servicer, which will have 15 days to respond regarding your complaint and the proposed steps that will be taken to resolve your complaint. Once you receive the company’s response, you have 60 days to provide feedback.

    3. Develop an individualized action plan

    You need an action plan that is tailored for your specific financial life circumstance. Don’t let your student loan servicer steer you toward a short-term option when you should choose the long-term solution. When it comes to your personal finances, financial knowledge is power.

To find out more, visit  www.studentdebtcenter.org