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August 5, 2019
By Zack Friedman, Forbes
An educator thought she was on track to receive student loan forgiveness.
She made the payments. She thought she did everything right.
Then, she was told years later that she didn’t qualify.
Here’s what you need to know – and how you can avoid her fate.
New Lawsuit: Student Loan Forgiveness
As first reported by NPR, Debbie Baker, a Director Education at a non-profit organization in Tulsa, Oklahoma, expected that her $76,000 of student loan debt would be forgiven through the Public Service Loan Forgiveness program, a federal program through the U.S. Department of Education that forgives federal student loans for individuals who work in public service.
According to Baker, her student loan servicer – the company responsible for collecting and managing her student loan payments – allegedly told her for nine years that she met all the requirements to receive public service loan forgiveness. As such, Baker thought she would have all her federal student loan forgiven after meeting the program’s requirements, which she believed she met. However, after making her usual monthly payments under an income-driven repayment program, the U.S. Department of Education said she did not qualify for student loan forgiveness. You can imagine Baker’s reaction.
Now, Baker is a plaintiff in a new lawsuit filed by the American Federation of Teachers, one of the nation’s largest teacher’s unions, against the U.S. Department of Education, which is led by Secretary Betsy DeVos. The lawsuit alleges, among other things, that:
- the Public Service Loan Forgiveness program is “grossly mismanaged” and
- the program, as it’s currently administered, violates the Due Process Clause of the Fifth Amendment to the U.S. Constitution
- the U.S. Department of Education is aware that student loan servicers make misrepresentations to borrowers, which results in borrowers getting rejected for student loan forgiveness and suffering financial and other harm.
Was Baker given the wrong information from her student loan servicer? Was it Baker’s responsibility to understand all the requirements of the program? Is the program administered properly? What is the proper role of student loan servicers – advisors or student loan payment collectors? Many of these issues may be addressed as a result of this lawsuit.
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August 1, 2019
By Elissa Nadworny, NPR
Most days, 25-year-old Chavonne can push her student loan debt to the back of her mind.
Between short-term office jobs in the Washington, D.C., area, she drives for Uber. But once in awhile, a debt collector will get hold of her cellphone number — the one she keeps changing to avoid them — and it all comes back fresh. “I’ll be like, ‘Oh no!’ ” she says. “It’s a sad reminder that I owe somebody money!”
In April, she got another reminder when the government seized her tax refund.
All this for a degree she never finished.
Back in high school, she recalls, her teachers and friends pushed her to go to college. And so, without too much thought, Chavonne enrolled at the University of Mississippi and borrowed about $20,000 to pay for it.
Far away from home and in a challenging environment, she struggled — and after three semesters, she’d had enough. Her college days are five years behind her, but the debt she took on is not.
Today, rent, car payments, gas and food are higher up on her list of priorities. And so she’s in default, not paying on her loans.
The one thing that could help Chavonne earn more money, of course, is earning a degree. But because she’s in default, she doesn’t have access to federal student aid that could help her go back and finish. It’s a vicious cycle for Chavonne and millions of other students who leave college with debt and without a degree.
From mid-2014 to mid-2016, 3.9 million undergraduates with federal student loan debt dropped out, according to an analysis of federal data by The Hechinger Report, a nonprofit news organization.
The default rate among borrowers who didn’t complete their degree is three times as high as the rate for borrowers who did earn a diploma. When these students stop taking classes, they don’t get the wage bump that graduates get that could help them pay back their loans.
The perception is, work hard and pay what you owe, says Tiffany Jones, who leads higher education policy at the Education Trust, “but it’s not manageable even if you’re working.”
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July 26, 2019
By Collin Binkley, ABC News
Tens of thousands of federal student loan borrowers may be getting their monthly payments lowered by lying about their income and family size, yet the U.S. Education Department is doing little to catch them, according to a report released Thursday by a federal watchdog agency.
Among the most extreme cases reported by the Government Accountability Office are two separate borrowers who claimed to have 93 relatives in their households, along with 3,300 cases in which borrowers said they had no income even though federal data suggest they made $100,000 a year or more. All were approved for lower loan payments.
Investigators were reviewing the Education Department’s oversight of its popular income-driven repayment plans, which allow borrowers to pay lower monthly rates based on their incomes and family sizes. After 25 years of payments, all remaining debt is wiped clean.
Education Secretary Betsy DeVos said her agency will conduct comprehensive review of the repayment plans and will refer cases of fraud to the Justice Department for prosecution. She placed blame on previous administrations, saying the problems are proof that “many of the policy ideas previously pursued were poorly implemented.”
“Misrepresenting income or family size is wrong, and we must have a system in place to ensure that dishonest people do not get away with it,” DeVos said. “We didn’t create that problem, but rest assured we will fix it.”
The federal watchdog agency says it identified 95,100 cases in which borrowers were approved as having no income even though it appears they were earning money. Using wage data from the Department of Health and Human Services, investigators found that borrowers in a third of those cases may actually have been making $45,000 a year or more, including some who topped $100,000.
They concluded that the department “does not have procedures to verify borrower reports of zero income, nor, for the most part, procedures to verify borrower reports of family size.” Borrowers applying for the repayment plans can check a box indicating they have no income, and the department generally takes them at their word with no further documentation needed, the investigation found.
If approved, borrowers with no income typically are not required to make monthly payments.
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July 23, 2019
By Annie Nova
Elisha Bokman has been out of school for eight years. Still, her student loan balance is half a million dollars.
Today, for her doctorate degree in naturopathic medicine and master’s in acupuncture from Bastyr University, she owes $499,322.69.
She and her husband struggled to buy a house because of her debt. Eventually, the financial stress led them to a divorce. “He felt like he couldn’t live his life or do the things he wanted to do,” Bokman, 38, said. She wanted to open her own medical practice, but she said her student debt prevents her from getting a business loan.
“It really effects the remainder of your life,” Bokman said. “There’s no out.”
Around 178,000 graduate students owed more than $100,000 in the 2015-2016 academic year, up from 51,000 in 2003-2004, according to Mark Kantrowitz, the publisher of SavingForCollege.com. In the first quarter of 2019, over 6% of all student loan borrowers owed more than $100,000, up from 5.4% in 2017.
Recently, Democratic presidential candidates Elizabeth Warren and Bernie Sanders have proposed forgiving student debt. Warren’s plan would reduce people’s tabs by up to $50,000, whereas Sanders’ would erase it all.
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July 18, 2019
Paying with paper instead of plastic helped Kristy Epperson eliminate $20,000 in student loan and car loan debt in just one year.
After earning her bachelor’s degree in nursing from Wright State University in 2017, Epperson owed about $16,000 in student loans from multiple borrowers with interest rates of between 3.6% and 6.8%. She also had roughly $4,000 left on her car loan, at an interest rate of 4.2%.
Even as Epperson began slowly chipping away at that debt, she managed to achieve another financial goal: homeownership. She was able to buy a place in Dayton, Ohio, with only 5% as a down payment. Becoming a homeowner forced her to take a hard look at her expenses and reevaluate her spending habits — which made her more determined to wipe out her student loan and auto debts.
“If something happened, if I lost my job, I’d have no way to pay my bills,” Epperson tells Grow. “I needed a better long-term plan.”
In addition to getting a second job as a substitute teacher, which brought in an extra $100 to $300 a month, Epperson created an expense spreadsheet and began tracking her purchases to help her pay down debt faster. She used her Instagram page, @DebtFreeAtTwentyThree, to share her setbacks, strategies, and accomplishments.
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