DJ Rausa, student loan attorney for Marshall & Associates, PLLC, was recently interviewed by NewsChannel 5 in Nashville on the topic of SCOTUS: Latest on Student Loan Forgiveness. In the interview, Attorney Rausa explains why the U.S. Supreme Court ruled against the current administration’s loan forgiveness plan and discusses the debts certain Americans will now face. Following the interview, the television host opens questions up to the Nashville viewers for an Openline Q&A session.
Debt Questions for Attorney Rausa
What does the latest U.S. Supreme Court decision mean to Americans with student loan debt looking for forgiveness of $10,000 or $20,000.
What will happen to federal student loans that are currently paused or on hold as a result of the pandemic.
Did the justices on the U.S. Supreme Court make the right decision?
How will payments and interest accrual be impacted for loans on pause?
When are the payments due?
Could federal student loan payments be delayed again?
What types of payment plans and options are available?
Is it possible to lower monthly payments?
What is an income-driven repayment plan?
How should a borrower plan for the student loan payment within their household budget?
Are there other federal programs still available to help borrowers with student loans?
September 30, 2021 was the expiration date set for the moratorium on the collections of Federal Student loans.
Final Extension Update: On August 6, 2021, the U.S. Department of Education reported that the current federal government administration under President Biden announced a final extension of the temporary delay in student loan repayments, including interest due and collection activities.
New Federal Student Loan Collections Pause Deadline
The new final extension runs through January 31, 2022.
On February 1, 2022, federal lenders will begin requiring payments once again and are at liberty to collect on the student debts owed, including accrued interest and past due amounts. If you have a federal student loan, this gives you time to establish a plan to resume student loan payments and work out any delinquency issues with your lender.
Student Loan Interest Rate Increase
Additionally, the interest rate on these student loans then shift away from 0% interest back to the contract rate, which could be as high as 10%.
What this means is for approximately 40 million student loan borrowers is that repayment status will commence. Many of these student loan borrowers will now be saddled with having to make monthly payments again and which may result in an already strained financial situation.
Expiration of Moratorium
In addition to the expiration of the moratorium, approximately 10 million Federal Student Loan borrowers will find themselves having to deal with different student loan servicers. Two major players in the student loan servicing arena, FedLoan Servicing and Granite State, have announced the termination of their contacts with the US Department of Education at the end of 2021. This will result in the transferring of approximately 10 million accounts to a new servicer, one many may never had heard of. This will, obviously, add even more confusion to the already confusing and frustrating student loan servicing system.
There will not be any help out of Washington DC nor from our current administration for several reasons. First off, there is no major consensus regarding the ability of the President to issue an executive order forgiving any amount of student loan debt, so don’t rely on a Presidential bail out.
Secondly, don’t rely on any congressional action either as there is no bipartisan agreement in sight for any amount of student loan forgiveness. There is also disagreement and a lack of consensus within the parties themselves.
Each and every student loan borrower is on their own to take affirmative action on addressing their student loan debt.
What can be done:
Start Payments and Contact Student Loan Servicer
If you are in a good financial place and can make your student loan payments, you should commence making those payments if you have not been doing so. Any payments made during the moratorium when the interest rate was 0%, went to reducing the overall balance of your loans. Of the utmost importance, circle back to your student loan servicer and update your account with them in the event that your contact information has changed.
Consider Other Repayment Options: IDR Plans
If you are not in a position to commence payments, then it is time to reexamine your repayment options. An income-based repayment plan, IDR, may be a good starting point provided your student loans are eligible. Additionally, depending on the type of Federal Student Loan as well as the amount of household income and household size, very forgiving and affordable IDR plans are available.
If you have been in an IDR program I recommend recertifying now. This will establish your monthly payment based on your household size and your current income. This will allow you to make an affordable payment, without any regard to the balance of the loans, for the next 12 months, even if your income increases.
PUBLIC SERVICE LOAN FORGIVENESS
Any student loan borrower who is presently in PSLF your servicer, FedLoan, is going to transfer you to a new servicer. This may very well cause some disruption and may result in suspension of your qualified payments. To avoid any problems, I recommend recertifying your employment now and update any change in contact information. This will ensure that the new servicer has current information and can communicate with you. I also recommend commencing your monthly payment, keeping good payment history records as well as maintaining all you W2s from every qualified employer. This will enable you to have all the necessary documentation for the loan forgiveness after 120 qualified payments are made.
If you have become disabled since the moratorium went into effect, now is a good time to apply for your Student Loan Forgiveness based on your disability. All that is required is that a medical doctor certifies that you are disabled, your disability prevents you from working, and your disability will remain for at least the next 60 months. If the Social Security Administration has deemed you disabled then you may qualify for TPD without a doctor certification provided that all requirements are met.
Administrative Discharge of Federal Student Loans for 100% Disabled Veterans
(Updated: Part 2)
This post is to follow up on our July 3, 2019 post concerning the administrative discharge of Federal Student Loans based on a Veteran’s Disability Ratings.
Not much has changed with the exception of the newly released Presidential Memorandum issued on August 21, 2019. Perhaps you have heard about it.
The administrative discharge of Federal Student Loans for 100% Disabled Veterans is a program that was created in 2008, so it has been around for a long time. That being said, of those eligible, only a small percentage of the 25,000 Eligible Veterans have taken advantage of the program. Unfortunately, most Veterans who are eligible are either not aware, or have been mislead or misinformed. There is a big push to clear up this problem, including proposed changes in the law, through an Act of Congress.
Presidential Directive to Secretary of Veterans Affairs and Education Secretary
The President, just recently, issued a directive to the Secretary of Veterans Affairs and the Secretary of Education to work together, share the information, and be proactive in reaching, informing, and assisting all 100% totally and permanently Disabled Veterans in obtaining their discharge.
Earlier this year, Rep. Connor Lamb, D-Pa. and Senate Veterans Affairs Committee Chairman Johnny Isakson, R-Ga., each sponsored legislation to make the loan forgiveness automatic, putting the impetus of clearing the debt on federal agencies instead of the military veterans. Clearly, if Congress passed such a bill, the vast majority of problems would be eliminated.
As a fellow Veteran, I remain optimistic for my Brothers and Sisters who have served.
Federal Student Loan Forgiveness Program: Public Service
What is it?
How do I get it?
The Straight Talk!
There is nothing worse that than to hear stories from clients who thought they did everything right, only to find out, ten (10) years later, that their forgiveness application was denied and their participation in the program was wholly unsuccessful. We do not want this to happen to our clients.
What you Need to Know Public Service Education Debt Forgiveness
Public Service Loan Forgiveness is a Federal Student Loan Forgiveness Program that only applies to those who have Federal Student Loans and work, full time, for a Governmental Entity or a Qualified Non-Profit. How it works is pretty straight forward. You work in the public or non-profit sector for 10 years, make payments for 10 years, and if the balance is not paid off in 10 years, the balance is forgiven. Seems straightforward. But it is not.
So let’s break it down to it’s essential terms.
First, you much have a qualified Federal Student Loan. Not all Federal Student Loans qualify for this program. If you have a student loan under the old student loan lending system, FFEL, they those loans do not qualify. The loans must be under the Direct Student Loan System.
The vast majority of borrowers who thought they had the correct type of loans were denied forgiveness because they had the wrong type of loan, were given the wrong information, and paid on their loans for 10 years, only to find out that their loans were not eligible.
The student loan borrowed must have worked full time for a qualified employer for the full ten years. The 10 years has to be cumulative, and not necessarily consecutive or with one qualified employer. Teachers can go from one school district to another, as an example.
The first step in this process is to have your Federal Student Loans reviewed by a Student Loan Lawyer to ensure that the loans are eligible student loans for Public Service Loan Forgiveness. The last thing you want to have happened is to pay on loans, and not have them be qualified. Our attorneys suggest obtaining your National Student Loan Data System report and have it reviewed by our office. This is the number one reason that countless public servants have had their forgiveness applications denied. DO NOT LET THIS HAPPEN TO YOU.
If a borrower has non-qualified student loans, FFEL, then they can be consolidated into the Direct Student Loan System. We can assist with this process. Once that is accomplished, then they become qualified loans and the ten year payment cycle begins to run. There is no credit given for payments made on non-qualified loans.
The student loan borrower has to make the qualified payments, on the qualified loans, while working full time for a qualified employer, in full, and on time. What this means is that a payment plan under the Direct Student Loan Program has to be established and complied with for 10 years, 120 consecutive, qualified payments, in full and on time. If payments are suspended for any reason, then the 120 months worth of payments is suspended. For an example, if the borrower requested a deferment or forbearance.
If the Federal student loans can be paid off within 10 years, then there is no reason for a borrower to participate in this program. However, if the balance cannot be paid off in 10 years, then the Public Service Loan Forgiveness Program will be a benefit to the borrower because the balance will be forgiven.
That being said, the borrower must enroll in an Income Drive Repayment Plan under the Direct Student Loan Program. These repayment plans are based on household size and household income, rather than the balance of the loans. These then become your qualified payments.
Income-Driven Repayment Plans
To enroll in an income-driven repayment plan, an application must be filled out and submitted to the student loan servicer. The two most important steps to ensure the forgiveness program works is that payments are made in full and on time, each month, and, the yearly recertification of the Income Driven Repayment Plan is completed. If the borrower fails to recertify, then the whole program is terminated.
Fed Loan Servicing
FedLoan is the proper service for the whole Public Service Loan Forgiveness program. We ensure that each of our clients who wish to apply for PSLF moves all their loans to FedLoan in order to obtain the proper credit for each payment.
Department of Education
FedLoan Servicing, P.O Box 790234, St. Louis, MO 63179-0234 (effective 7/1/19)
Yearly Employment Certification
Our attorneys encourage all our clients to certify their employment with FedLoan, each year. This is accomplished with submission of the application, signed off by the employer, and sent into FedLoan. Keeping a copy of each application as well as each year’s W-2 is an excellent way to ensure completion. When we do this for our clients, we establish a paper trail, and send everything registered mail, return receipt requested, retain a copy for our file and send one to the client.
Our Veterans who have a service-connected disability can apply for a total Federal Student Loan Forgiveness (TPD) based on their Disability Rating from the Veterans Administration. The disability rating from the VA has to be 100% service connected if the VA certification is used. The Application process is straight forward and the VA can issue a document indicating the VA Disability rating upon request.
What some military Veterans do not know is that loan forgiveness of their Federal Student Loans can still be obtained even if their VA disability rating is less than 100%. It is a slightly different process.
Here is how it works. Any Medical Doctor can certify that a Veteran is unable to work based on their medical condition and that the medical condition will prevail for the next 5 years or can be expected to result in death, and it will prevent them from obtaining substantial gainful employment. For an example, any Veteran who suffers from Post Traumatic Stress Disorder which has cause a VA Disability rating of 80%, can still obtain a Total and Permanent Disability Discharge of their Federal Student Loans. (TPD)
The Department of Veteran’s Affairs and the U.S. Department of Education are now working together to enable our Veterans more access to TPD process by cross referencing the data bases, much like they have done with the Social Security Disability system.
Attorney D.J. Rausa is a Veteran who served in the United States Navy. He has assisted dozens of military Veterans obtain their TPD. Sometimes the application is denied with no explanation and the Veteran is in need of the assistance of a Student Loan Lawyer. The Veteran has the right to have someone act on their behalf.
Military Loan Forgiveness Application Forms
Veterans with a service-connected disability may apply for student loan forgiveness at the link below. Forms are available in English and Spanish.
An application has to be filled out and sent to the U.S. Department of Education, TPD Servicing, and Nelnet.
There is also a Third-Party Designation Form to be completed.
You may also apply by phone or ask questions by calling 888-303-7818.
Tax Consequences Under New Tax Law
As a result of a change in tax law, loan balances that are discharged due to TPD are not considered income for federal tax purposes if you receive the discharge during the period from January 1, 2018 through December 31, 2025.
If you are a Veteran or know of a Veteran who needs to exercise their right to take advantage of this benefit, then please share this information with them.
We here at Marshall & Associates are always available to assist our Veteran Community.
Article by Attorney DJ Rausa, Marshall & Associates
A trusted student loan adviser, within the school, was indicted for stealing student loans from those attending school and for taking out student loans fraudulently by using the identity of the unsuspected. I am can imagine the surprise, worry and devastation that this would cause a student.
Importance of Students Researching Financial Aid Balances
I have been practicing Student Loan Law since 2014, but this is a new one on me. The Student Loan System has its problems, but now, it is even more important for a student to check their financial aid and balance that account against their tuition costs every semester, much like a check book.
This is a very good habit to get into because it will keep a student loan borrower up to date on the cost of each semester. It will also provide a good understanding of the cost of the degree being pursued. It will ensure that the student loan money being borrowed is being used in furtherance of that education and enable a student to get a clear picture of what type of salary is going to be needed to address the total debt burden after graduating.
How to Request Student Loan Report
I am often asked by my clients, “How do I get this report? ”
You can obtain your student loan report from the US Department of Education by utilizing this link.
This report will provide detailed information regarding all your Federal Student Loans. It will give the student loan borrower the loan amount, the balance of all Federal Loans, the interest rates, the payment status, the information of the servicer, and the type of loan that was made.
This information is critical to review not only when a student loan borrower is in school, but also after graduation when payment on the loans are due. While formulating a plan to manage student loan debt, checks and balances need to be made to eliminate surprises.
At Marshall & Associates, our Student Loan Attorneys will review this report with you to ensure it is accurate.