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09 ноября 2017, 16:32

What The Nelnet Acquisition Means For Your Student Loans

Nelnet is acquiring Great Lakes. Here's what it means for your student loans.

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06 ноября 2017, 02:35

Matt Taibbi Exposes The Great College Loan Swindle

Authored by Matt Taibbi via RollingStone.com, How universities, banks and the government turned student debt into America's next financial black hole... On a wind-swept, frigid night in February 2009, a 37-year-old schoolteacher named Scott Nailor parked his rusted '92 Toyota Tercel in the parking lot of a Fireside Inn in Auburn, Maine. He picked this spot to have a final reckoning with himself. He was going to end his life. Beaten down after more than a decade of struggle with student debt, after years of taking false doors and slipping into various puddles of bureaucratic quicksand, he was giving up the fight. "This is it, I'm done," he remembers thinking. "I sat there and just sort of felt like I'm going to take my life. I'm going to find a way to park this car in the garage, with it running or whatever." Nailor's problems began at 19 years old, when he borrowed for tuition so that he could pursue a bachelor's degree at the University of Southern Maine. He graduated summa cum laude four years later and immediately got a job in his field, as an English teacher. But he graduated with $35,000 in debt, a big hill to climb on a part-time teacher's $18,000 salary. He struggled with payments, and he and his wife then consolidated their student debt, which soon totaled more than $50,000. They declared bankruptcy and defaulted on the loans. From there he found himself in a loan "rehabilitation" program that added to his overall balance. "That's when the noose began to tighten," he says. The collectors called day and night, at work and at home. "In the middle of class too, while I was teaching," he says. He ended up in another rehabilitation program that put him on a road toward an essentially endless cycle of rising payments. Today, he pays $471 a month toward "rehabilitation," and, like countless other borrowers, he pays nothing at all toward his real debt, which he now calculates would cost more than $100,000 to extinguish. "Not one dollar of it goes to principal," says Nailor. "I will never be able to pay it off. My only hope to escape from this crushing debt is to die." After repeated phone calls with lending agencies about his ever-rising interest payments, Nailor now believes things will only get worse with time. "At this rate, I may easily break $1 million in debt before I retire from teaching," he says. Nailor had more than once reached the stage in his thoughts where he was thinking about how to physically pull off his suicide. "I'd been there before, that just was the worst of it," he says. "It scared me, bad." He had a young son and a younger daughter, but Nailor had been so broken by the experience of financial failure that he managed to convince himself they would be better off without him. What saved him is that he called his wife to say goodbye. "I don't know why I called my wife. I'm glad I did," he says. "I just wanted her or someone to tell me to pick it up, keep fighting, it's going to be all right. And she did." From that moment, Nailor managed to focus on his family. Still, the core problem – the spiraling debt that has taken over his life, as it has for millions of other Americans – remains. Horror stories about student debt are nothing new. But this school year marks a considerable worsening of a tale that ought to have been a national emergency years ago. The government in charge of regulating this mess is now filled with predatory monsters who have extensive ties to the exploitative for-profit education industry – from Donald Trump himself to Education Secretary Betsy DeVos, who sets much of the federal loan policy, to Julian Schmoke, onetime dean of the infamous DeVry University, whom Trump appointed to police fraud in education. Americans don't understand the student-loan crisis because they've been trained to view the issue in terms of a series of separate, unrelated problems. They will read in one place that as of the summer of 2017, a record 8.5 million Americans are in default on their student debt, with about $1.3 trillion in loans still outstanding. In another place, voters will read that the cost of higher education is skyrocketing, soaring in a seemingly market-defying arc that for nearly a decade now has run almost double the rate of inflation. Tuition for a halfway decent school now frequently surpasses $50,000 a year. How, the average newsreader wonders, can any child not born in a yacht afford to go to school these days? In a third place, that same reader will see some heartless monster, usually a Republican, threatening to cut federal student lending. The current bogeyman is Trump, who is threatening to slash the Pell Grant program by $3.9 billion, which would seem to put higher education even further out of reach for poor and middle-income families. This too seems appalling, and triggers a different kind of response, encouraging progressive voters to lobby for increased availability for educational lending. But the separateness of these stories clouds the unifying issue underneath: The education industry as a whole is a con. In fact, since the mortgage business blew up in 2008, education and student debt is probably our reigning unexposed nation-wide scam. It's a multiparty affair, what shakedown artists call a "big store scheme," like in the movie The Sting: a complex deception requiring a big cast to string the mark along every step of the way. In higher education, every party you meet, from the moment you first set foot on campus, is in on the game. America as a country has evolved in recent decades into a confederacy of widescale industrial scams. The biggest slices of our economic pie – sectors like health care, military production, banking, even commercial and residential real estate – have become crude income-redistribution schemes, often untethered from the market by subsidies or bailouts, with the richest companies benefiting from gamed or denuded regulatory systems that make profits almost as assured as taxes. Guaranteed-profit scams – that's the last thing America makes with any level of consistent competence. In that light, Trump, among other things, the former head of a schlock diploma mill called Trump University, is a perfect president for these times. He's the scammer-in-chief in the Great American Ripoff Age, a time in which fleecing students is one of our signature achievements. It starts with the sales pitch colleges make to kids. The thrust of it is usually that people who go to college make lots more money than the unfortunate dunces who don't. "A bachelor's degree is worth $2.8 million on average over a lifetime" is how Georgetown University put it. The Census Bureau tells us similarly that a master's degree is worth on average about $1.3 million more than a high school diploma. But these stats say more about the increasing uselessness of a high school degree than they do about the value of a college diploma. Moreover, since virtually everyone at the very highest strata of society has a college degree, the stats are skewed by a handful of financial titans. A college degree has become a minimal status marker as much as anything else. "I'm sure people who take polo lessons or sailing lessons earn a lot more on average too," says Alan Collinge of Student Loan Justice, which advocates for debt forgiveness and other reforms. "Does that mean you should send your kids to sailing school?" But the pitch works on everyone these days, especially since good jobs for Trump's beloved "poorly educated" are scarce to nonexistent. Going to college doesn't guarantee a good job, far from it, but the data show that not going dooms most young people to an increasingly shallow pool of the very crappiest, lowest-paying jobs. There's a lot of stick, but not much carrot, in the education game. It's a vicious cycle. Since everyone feels obligated to go to college, most everyone who can go, does, creating a glut of graduates. And as that glut of degree recipients grows, the squeeze on the un-degreed grows tighter, increasing further that original negative incentive: Don't go to college, and you'll be standing on soup lines by age 25. With that inducement in place, colleges can charge almost any amount, and kids will pay – so long as they can get the money. And here we run into problem number two: It's too easy to find that money. Parents, not wanting their kids to fall behind, will pay every dollar they have. But if they don't have the cash, there is a virtually unlimited amount of credit available to young people. Proposed cuts to Pell Grants aside, the landscape is filled with public and private lending, and students gobble it up. Kids who walk into financial-aid offices are often not told what signing their names on the various aid forms will mean down the line. A lot of kids don't even understand the concept of interest or amortization tables – they think if they're borrowing $8,000, they're paying back $8,000. Nailor certainly was unaware of what he was getting into when he was 19. "I had no idea [about interest]," he says. "I just remember thinking, 'I don't have to worry about it right now. I want to go to school.' " He pauses in disgust. "It's unsettling to remember how it was like, 'Here, just sign this and you're all set.' I wish I could take the time machine back and slap myself in the face." The average amount of debt for a student leaving school is skyrocketing even faster than the rate of tuition increase. In 2016, for instance, the average amount of debt for an exiting college graduate was a staggering $37,172. That's a rise of six percent over just the previous year. With the average undergraduate interest rate at about 3.7 percent, the interest alone costs around $115 per month, meaning anyone who can't afford to pay into the principal faces the prospect of $69,000 in payments over 50 years. So here's the con so far. You must go to college because you're screwed if you don't.   Costs are outrageously high, but you pay them because you have to, and because the system makes it easy to borrow massive amounts of money.   The third part of the con is the worst: You can't get out of the debt. Since government lenders in particular have virtually unlimited power to collect on student debt – preying on everything from salary to income-tax returns – even running is not an option. And since most young people find themselves unable to make their full payments early on, they often find themselves perpetually paying down interest only, never touching the principal. Our billionaire president can declare bankruptcy four times, but students are the one class of citizen that may not do it even once. October 2017 was supposed to represent the first glimmer of light at the end of this tunnel. This month marks the 10th anniversary of the Public Service Loan Forgiveness program, one of the few avenues for wiping out student debt. The idea, launched by George W. Bush, was pretty simple: Students could pledge to work 10 years for the government or a nonprofit and have their debt forgiven. In order to qualify, borrowers had to make payments for 10 years using a complex formula. This month, then, was to start the first mass wipeouts of debt in the history of American student lending. But more than half of the 700,000 enrollees have already been expunged from the program for, among other things, failing to certify their incomes on time, one of many bureaucratic tricks employed to limit forgiveness eligibility. To date, fewer than 500 participants are scheduled to receive loan forgiveness in this first round. Moreover, Trump has called for the program's elimination by 2018, meaning that any relief that begins this month is likely only temporary. The only thing that is guaranteed to remain real for the immediate future are the massive profits being generated on the backs of young people, who before long become old people who, all too often, remain ensnared until their last days in one of the country's most brilliant and devious moneymaking schemes. Everybody wins in this madness, except students. Even though many of the loans are originated by the state, most of them are serviced by private or quasi-private companies like Navient – which until 2014 was the student-loan arm of Sallie Mae – or Nelnet, companies that reported a combined profit of around $1 billion last year (the U.S. government made a profit of $1.6 billion in 2016!). Debt-collector companies like Performant (which generated $141.4 million in revenues; the family of Betsy DeVos is a major investor), and most particularly the colleges and universities, get to prey on the desperation and terror of parents and young people, and in the process rake in vast sums virtually without fear of market consequence. About that: Universities, especially public institutions, have successfully defended rising tuition in recent years by blaming the hikes on reduced support from states. But this explanation was blown to bits in large part due to a bizarre slip-up in the middle of a controversy over state support of the University of Wisconsin system a few years ago. In that incident, UW raised tuition by 5.5 percent six years in a row after 2007. The school blamed stresses from the financial crisis and decreased state aid. But when pressed during a state committee hearing in 2013 about the university's finances, UW system president Kevin Reilly admitted they held $648 million in reserve, including $414 million in tuition payments. This was excess hidey-hole cash the school was sitting on, separate and distinct from, say, an endowment fund. After the university was showered with criticism for hoarding cash at a time when it was gouging students with huge price increases every year, the school responded by saying, essentially, it only did what all the other kids were doing. UW released data showing that other major state-school systems across the country were similarly stashing huge amounts of cash. While Wisconsin's surplus was only 25 percent of its operating budget, for instance, Minnesota's was 29 percent, and Illinois maintained a whopping 34 percent reserve. When Collinge, of Student Loan Justice, looked into it, he found that the phenomenon wasn't confined to state schools. Private schools, too, have been hoarding cash even as they plead poverty and jack up tuition fees. "They're all doing it," he says. While universities sit on their stockpiles of cash and the loan industry generates record profits, the pain of living in debilitating debt for many lasts into retirement. Take Veronica Martish. She's a 68-year-old veteran, having served in the armed forces in the Vietnam era. She's also a grandmother who's never been in trouble and consid?ers herself a patriot. "The thing is, I tried to do everything right in my life," she says. "But this ruined my life." This is an $8,000 student loan she took out in 1989, through Sallie Mae. She borrowed the money so she could take courses at Quinebaug Valley Community College in Connecticut. Five years later, after deaths in her family, she fell behind on her payments and entered a loan-rehabilitation program. "That's when my nightmare began," she says. In rehabilitation, Martish's $8,000 loan, with fees and interest, ballooned into a $27,000 debt, which she has been carrying ever since. She says she's paid more than $63,000 to date and is nowhere near discharging the principal. "By the time I die," she says, "I will probably pay more than $200,000 toward an $8,000 loan." She pauses. "It's a scam, you see. Nothing ever comes off the loan. It's all interest and fees. And they chase you until you're old, like me. They never stop. Ever." And that's the other thing about lending to students: It's the safest grift around. There's probably no better symbol of the bankruptcy of the education industry than Trump University. The half-literate president's effort at higher learning drew in suckers with pathetic promises of great real-estate insights (for instance, that Trump "hand-picked" the instructors) and then charged them truckfuls of cash for get-rich-quick tutorials that students and faculty later described as "almost completely worthless" and a "total lie." That Trump got to settle a lawsuit on this matter for $25 million and still managed to be elected president is, ironically, a remarkable testament to the failure of our education system. About the only example that might be worse is DeVry University, which told students that 90 percent of graduates seeking jobs found them in their fields within six months of graduation. The FTC found those claims "false and unsubstantiated," and ordered $100 million in refunds and debt relief, but that was in 2016 – before Trump put DeVry chief Schmoke, of all people, in charge of rooting out education fraud. Like a lot of things connected to politics lately, it would be funny if it weren't somehow actually happening.?"Yeah, it's the fox guarding the henhouse," says Collinge. "You could probably find a worse analogy." But the real problem with the student-loan story is that it's so poorly understood by people not living the nightmare. There's so much propaganda that blames the borrowers for taking on the debt in the first place that there's often little sympathy for people in hopeless situations. To make matters worse, band-aid programs that supposedly offer help hypnotize the public into thinking there are ways out, when the "help" is usually just another trick to add to the balance. "That's part of the problem with the narrative," says Nailor, the schoolteacher. "People think that there's help, so what are you complaining about? All you got to do is apply for help." But the help, he says, coming from a for-profit predatory system, often just makes things worse. "It did for me," he says. "It does for a lot of people."

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18 апреля 2017, 07:46

Student Loan Lawsuits: 10 Things You Need to Know

Several lawsuits filed against student loan servicer Navient allege that borrowers have been mislead and mistreated by the people who handle their debt.

07 апреля 2017, 18:26

How Student Debt Becomes an Asset-Backed Security

Student debt balances are huge and growing. Many grads aren’t sure they can pay. And this debt is packaged into asset-backed securities. Sound familiar?

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14 ноября 2016, 21:01

Nelnet downgraded to neutral from outperform at Credit Suisse

This is a Real-time headline. These are breaking news, delivered the minute it happens, delivered ticker-tape style. Visit www.marketwatch.com or the quote page for more information about this breaking news.

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09 августа 2016, 02:03

Why A Special Circle Of Student Loan Hell Is Reserved For College Dropouts

Just in case it wasn't already bad enough to be a recent Millennial college graduate in the US with tens of thousands in student debt (recall that of those lucky enough to have a job after graduation, roughly half live paycheck to paycheck; as for those without a job, well... our condolences), it turns out there is a special circle in student loan hell reserved for those who never manage to graduate. Because as Bloomberg reports, when it comes to collecting on student loans, the U.S. Department of Education treats college dropouts the same as Ivy League graduates: They just want the money back. But that's only part of the bad news. It will come as no surprise that when it comes to wage potential, dropouts are in a category of their own. The dead last category. Unlike peers who earn degrees, dropouts generally don't command higher wages after leaving school, making it harder for them to repay their student debt. The typical college dropout experienced a steep fall in wealth from 2010 to 2013, figures from the Federal Reserve in Washington show, and an 11 percent drop in income—the sharpest decline among any group in America. Worse, dropouts who took out loans to finance the degrees they ultimately didn't obtain often end up worse off for attending college. It should therefore, as Bloomberg writes, come as no surprise that half of federal student loan borrowers who dropped out of school within the past three years are late on their payments, according to Education Department figures provided to Bloomberg. More than half of those delinquent borrowers are at least 91 days behind. By comparison, just 7.2 percent of recent college graduates are more than three months late on their debt. There are two immediate takeaways from the figures, according to the author.  The first is that higher education experts eager to put families at ease about the increasing cost of college are likely to conclude that whatever crisis exists in student loans is concentrated among college dropouts, so graduates needn't worry. This is largely how the Education Department and the White House view the issue. The department recently focused its efforts on improving graduation rates, hoping it will lead to fewer loan defaults. But it's unlikely that approach will yield benefits soon. Graduation rates have increased by less than five percentage points over the past dozen years, federal data show. The problem with this approach is that even the NY Fed recently admitted that it is not just the dropouts who are impacted as student loans are the primary culprit for record wealth inequality in the US: a demographic that is far broader than just the narrow dropout subset. The second takeaway is that it's time for the Education Department and its loan contractors to pay special attention to the groups of borrowers most likely to struggle with their debt. The Education Department outsources the work of collecting payments and counseling borrowers on their repayment options to loan contractors such as Navient Corp. and Nelnet Inc. The government pays these contractors about six times more for accounts that are current rather than seriously delinquent, regardless of the costs the companies incur to help borrowers resolve their delinquency. Loan companies say they simply don't get paid enough to help the neediest borrowers. As such, the segment of the US population most in need of counseling, and outright help, is least likely to get it. And this is happening under an 8-year progressive agenda. Bloomberg adds that the Education Department has known for years that the typical borrower who defaults on her debt didn't graduate with a credential, federal records show. Yet its Federal Student Aid office—the somewhat independent unit that runs the government's student loan program—doesn't mandate special procedures for its contractors' dealings with borrowers most at risk of default. Instead, FSA gives its loan contractors "broad latitude" to handle borrowers' accounts. And while the conclusion of the original piece is admirable, namely that the government should intervene on behalf of the borrowers and negotiate with the loan contractors to ease terms of the loan, adding that last month, the department directed FSA to structure its next round of contracts in a way that guarantees that dropouts would quickly get help with their loans from specially trained customer service representatives, the real story here is a simple one, and one we have repeated for a long time: the government should admit that the current higher learning paradigm is flawed, where as a result of ultra low rates, college tuition is soaring, but due to the unprecedented ease in attaining student debt, few find college costs to be a gating factor no matter how bleak the practical outcomes of a college education may be for loan repayment or future income potential. As such what the government should do is overhaul the entire process of setting college tuition, which in recent years has exploded at a rate that is orders of magnitude higher than that of core inflation. And since ultimately this is not a government decision but one driven by simple monetary dynamics, and blessed by a low cost of money, the real culprit here is the Fed (the same Fed which ironically just last week found that student loans are the cause behind America's wealth divide) which by keeping the rates at zero, assures that problems faced by both college grads - and dropouts - will only get worse. And yes, as even the Fed will now admit, the wealth divide in the US will only get more profound as the populist tensions revealed not only by Brexit but by the ongoing summer of rage in the US hit a breaking point at which point the Fed's decision will finally be taken out of its hands.

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17 июня 2016, 22:40

Nelnet tries to stave off student loan ABS downgrades

NEW YORK (IFR) - Student loan servicer Nelnet is trying to stave off downgrades on US$3.25bn of its debt, and wants investors to help by agreeing to extend the maturity date of its bonds.

23 декабря 2015, 20:07

When You Weren't Paying Attention Congress Shook Up The Student Loan Market

Some 42 million Americans could become less likely to fall behind on their student loans -- and get better customer service -- thanks to a new measure the Republican-led Congress forced on the U.S. Department of Education this month. The government's four largest student loan contractors have the worst track record when it comes to preventing late payments. Despite this, the Education Department funnels the bulk of new loans to those four contractors. But 50 words tucked into an 887-page spending bill President Barack Obama signed into law Friday will change that by directing the Education Department to treat its largest and smallest loan contractors equally. The department currently favors its four largest contractors, which include publicly-traded companies such as Navient Corp. and Nelnet Inc., by sending them 74 percent of borrowers who have recently left school and have to begin repaying the government. The department's six smaller contractors fight over the remaining 26 percent of borrowers. That occurs even though borrowers are about three times as likely to fall behind on their student loans if they're serviced by the four big loan contractors compared to the department's six smaller contractors, federal data show. At the best-performing large contractor, Great Lakes Higher Education Corp. & Affiliates, about 25 percent of borrowers are late on their required payments, according to the most recent figures from the Education Department. The delinquency rate at Mohela is about one-third of that, or less than 9 percent. The firm, also known as the Missouri Higher Education Loan Authority, is the best-performing small contractor. Roughly 36 percent of Nelnet's borrowers are delinquent -- giving it the highest delinquency rate of any department contractor. At the worst-performing small contractor, Oklahoma Student Loan Authority, 15 percent of borrowers are behind on their obligations. By directing more accounts to smaller loan contractors, representatives of those firms say, both taxpayers and student borrowers stand to benefit because borrowers at risk of falling behind will get the attention and service they need to make good on their obligations and avoid defaulting on their debts. The threat of losing future business could push the department's biggest loan servicers, such as Navient and Nelnet, to improve their own performance and reduce their borrowers' delinquency rates. "This provision is a win for student loan borrowers, ensuring that they receive effective, personalized loan servicing that guides them through their repayment period successfully, and for taxpayers, who deserve a system that maximizes existing and proven resources," Debra Chromy, president of the Education Finance Council, a Washington trade association, said in a statement. "This provision is a win for student loan borrowers." --Debra Chromy, president of the Education Finance Council The Education Department has until March 1 to implement the change. Starting next month, the department is expected to solicit a new round of contracts from loan servicers hoping to either join or remain part of the federal student loan program. It can take a few years of negotiation until the new contracts are finalized. In the meantime, by forcing the Education Department to allocate new loans based purely on measures such as delinquency rates and customer satisfaction surveys, smaller loan contractors could get close to 75 percent of all new loans, according to calculations by Ben Miller, who helps lead higher education policy for the Center for American Progress, a Washington advocacy group with close ties to the Obama administration. The Education Department has previously defended its arrangement with its loan servicers by claiming that smaller contractors have been mostly dealing with allegedly more reliable borrowers to begin with, which arguably makes it easier for smaller contractors like Mohela to achieve low delinquency rates. Companies such as Navient and Nelnet, which stand to gain fewer new accounts as a result of the change, could be among the biggest losers. Shares in Navient have fallen about 5 percent since Congress unveiled its plan on Dec. 16, bringing its total year-to-date drop to about 45 percent. Nelnet's stock has been flat since Dec. 16, though it's down about 30 percent this year. Total student debt, including private loans, has doubled since 2008 to about $1.3 trillion, according to the Federal Reserve. Americans collectively owe more on their student loans than they owe on their credit cards or auto loans, making student debt the second-largest source of household debt after home mortgages.  The Consumer Financial Protection Bureau estimates that nearly 8 million Americans, or about 1 in 5 with a higher education loan, are in default on their student loans. Millions more are delinquent or otherwise delaying payments due to financial hardship, allowing their burdens to grow as the accumulating interest is added to the balance.   Nearly 8 million Americans -- 1 in 5 of those with a higher education loan -- are in default on their student loans.   The White House has repeatedly directed the Education Department to aid struggling borrowers -- even enlisting the expertise of officials at the consumer bureau and the Treasury Department -- in a bid to reduce loan delinquencies and prevent defaults. But defaults have continued to increase in recent years, despite the fact that nearly every American with a federal student loan is eligible to make payments based on their monthly earnings. Federal student loans aren't in default until borrowers have gone 270 days, or nine months, without making payments. Americans are more likely to be at least 90 days late on their student loans than any other type of loan, according to the Federal Reserve Bank of New York. Borrower advocates and officials at the Treasury Department and federal consumer bureau suspect sloppy loan servicing practices are to blame for much of the rise in student loan distress. Servicers collect borrowers' monthly payments and counsel them on their repayment options. In March, in response to concerns about servicers' allegedly rampant mistreatment of debtors, Obama announced that "every borrower has the right to quality customer service, reliable information, and fair treatment, even if they struggle to repay their loans." Months later, in September, the consumer bureau declared that the industry was riddled with "widespread failures" after a review found many borrowers were unable to obtain basic information about their accounts, were frequently misled, surprised with unexpected late fees and often pushed into default. About 90 percent of all student loans are either owned or backed by the Education Department. That arguably makes Obama's and the CFPB's declarations an indictment of Education Secretary Arne Duncan's management of the federal student loan program. Miller, a former Education Department official, predicted that the department is likely to miss Congress's March 1 deadline. "Something that Congress always gets wrong is how long it takes to do things in the executive branch," he said. -- This feed and its contents are the property of The Huffington Post, and use is subject to our terms. It may be used for personal consumption, but may not be distributed on a website.

23 декабря 2015, 20:07

When You Weren't Paying Attention Congress Shook Up The Student Loan Market

Some 42 million Americans could become less likely to fall behind on their student loans -- and get better customer service -- thanks to a new measure the Republican-led Congress forced on the U.S. Department of Education this month. The government's four largest student loan contractors have the worst track record when it comes to preventing late payments. Despite this, the Education Department funnels the bulk of new loans to those four contractors. But 50 words tucked into an 887-page spending bill President Barack Obama signed into law Friday will change that by directing the Education Department to treat its largest and smallest loan contractors equally. The department currently favors its four largest contractors, which include publicly-traded companies such as Navient Corp. and Nelnet Inc., by sending them 74 percent of borrowers who have recently left school and have to begin repaying the government. The department's six smaller contractors fight over the remaining 26 percent of borrowers. That occurs even though borrowers are about three times as likely to fall behind on their student loans if they're serviced by the four big loan contractors compared to the department's six smaller contractors, federal data show. At the best-performing large contractor, Great Lakes Higher Education Corp. & Affiliates, about 25 percent of borrowers are late on their required payments, according to the most recent figures from the Education Department. The delinquency rate at Mohela is about one-third of that, or less than 9 percent. The firm, also known as the Missouri Higher Education Loan Authority, is the best-performing small contractor. Roughly 36 percent of Nelnet's borrowers are delinquent -- giving it the highest delinquency rate of any department contractor. At the worst-performing small contractor, Oklahoma Student Loan Authority, 15 percent of borrowers are behind on their obligations. By directing more accounts to smaller loan contractors, representatives of those firms say, both taxpayers and student borrowers stand to benefit because borrowers at risk of falling behind will get the attention and service they need to make good on their obligations and avoid defaulting on their debts. The threat of losing future business could push the department's biggest loan servicers, such as Navient and Nelnet, to improve their own performance and reduce their borrowers' delinquency rates. "This provision is a win for student loan borrowers, ensuring that they receive effective, personalized loan servicing that guides them through their repayment period successfully, and for taxpayers, who deserve a system that maximizes existing and proven resources," Debra Chromy, president of the Education Finance Council, a Washington trade association, said in a statement. "This provision is a win for student loan borrowers." --Debra Chromy, president of the Education Finance Council The Education Department has until March 1 to implement the change. Starting next month, the department is expected to solicit a new round of contracts from loan servicers hoping to either join or remain part of the federal student loan program. It can take a few years of negotiation until the new contracts are finalized. In the meantime, by forcing the Education Department to allocate new loans based purely on measures such as delinquency rates and customer satisfaction surveys, smaller loan contractors could get close to 75 percent of all new loans, according to calculations by Ben Miller, who helps lead higher education policy for the Center for American Progress, a Washington advocacy group with close ties to the Obama administration. The Education Department has previously defended its arrangement with its loan servicers by claiming that smaller contractors have been mostly dealing with allegedly more reliable borrowers to begin with, which arguably makes it easier for smaller contractors like Mohela to achieve low delinquency rates. Companies such as Navient and Nelnet, which stand to gain fewer new accounts as a result of the change, could be among the biggest losers. Shares in Navient have fallen about 5 percent since Congress unveiled its plan on Dec. 16, bringing its total year-to-date drop to about 45 percent. Nelnet's stock has been flat since Dec. 16, though it's down about 30 percent this year. Total student debt, including private loans, has doubled since 2008 to about $1.3 trillion, according to the Federal Reserve. Americans collectively owe more on their student loans than they owe on their credit cards or auto loans, making student debt the second-largest source of household debt after home mortgages.  The Consumer Financial Protection Bureau estimates that nearly 8 million Americans, or about 1 in 5 with a higher education loan, are in default on their student loans. Millions more are delinquent or otherwise delaying payments due to financial hardship, allowing their burdens to grow as the accumulating interest is added to the balance.   Nearly 8 million Americans -- 1 in 5 of those with a higher education loan -- are in default on their student loans.   The White House has repeatedly directed the Education Department to aid struggling borrowers -- even enlisting the expertise of officials at the consumer bureau and the Treasury Department -- in a bid to reduce loan delinquencies and prevent defaults. But defaults have continued to increase in recent years, despite the fact that nearly every American with a federal student loan is eligible to make payments based on their monthly earnings. Federal student loans aren't in default until borrowers have gone 270 days, or nine months, without making payments. Americans are more likely to be at least 90 days late on their student loans than any other type of loan, according to the Federal Reserve Bank of New York. Borrower advocates and officials at the Treasury Department and federal consumer bureau suspect sloppy loan servicing practices are to blame for much of the rise in student loan distress. Servicers collect borrowers' monthly payments and counsel them on their repayment options. In March, in response to concerns about servicers' allegedly rampant mistreatment of debtors, Obama announced that "every borrower has the right to quality customer service, reliable information, and fair treatment, even if they struggle to repay their loans." Months later, in September, the consumer bureau declared that the industry was riddled with "widespread failures" after a review found many borrowers were unable to obtain basic information about their accounts, were frequently misled, surprised with unexpected late fees and often pushed into default. About 90 percent of all student loans are either owned or backed by the Education Department. That arguably makes Obama's and the CFPB's declarations an indictment of Education Secretary Arne Duncan's management of the federal student loan program. Miller, a former Education Department official, predicted that the department is likely to miss Congress's March 1 deadline. "Something that Congress always gets wrong is how long it takes to do things in the executive branch," he said. -- This feed and its contents are the property of The Huffington Post, and use is subject to our terms. It may be used for personal consumption, but may not be distributed on a website.

04 декабря 2015, 20:02

Pay Down Student Loans and Save for Retirement: You Can Have It All

You might think it's impossible to save for retirement while you pay down student loans. Think again. Saving for retirement in your 20s is crucial; put away even a small amount now, and it will have decades to grow into a strong foundation for when you retire. Keep in mind that while you're addressing other areas of your financial health, it's vital to stay current on your loans and to send the minimum required payment to your student loan servicer every month. The right student loan repayment plan will keep your payments affordable. Follow these simple steps to prepare for retirement while you pay down your loans. Get the employer match on your 401(k) No matter how much student loan debt you have, take full advantage of a company match on your retirement plan contributions. When your company offers a match, it puts its own money into your employee-sponsored retirement account, depending on how much you contribute. The most common employer-sponsored accounts are 401(k) plans (available at for-profit companies) and 403(b) plans (offered by nonprofits, schools and hospitals). Say your human resources representative tells you at orientation that your company offers a 3% match toward your 401(k). That means if you elect to redirect 3% of your paycheck to a retirement account each pay period, your company will put in the same amount. So an amount equal to 6% of your pretax, biweekly pay will show up in your account, even though you contributed only half. You'll pay taxes on that money when you withdraw it during retirement. While the company will match your contributions if you put in 1% or 2% instead, you'd lose out on free money if you went that route. Get the full match and you'll be glad later when you have more in your account than you could have saved on your own. Don't have access to an employer-sponsored retirement plan? Set aside what you can spare in a Roth IRA, an individual retirement account. You can put up to $5,500 a year in a Roth IRA if you earn an annual income of $116,000 or less. You contribute to a Roth IRA after taxes have been taken out of your income, so you won't be taxed on that amount when you withdraw it at retirement. Prioritize paying down high-interest loans The decision whether to invest beyond your 401(k) match will come down to how much you pay in interest on your loans. It's best to pay off loans that carry interest of 7% or more before you put additional funds toward retirement. That will free up money you'd otherwise pay in interest in the future. Once your high-interest loans are paid off, continue to pay the minimum on low-interest loans while you invest. Or you could use the following rule of thumb when deciding which loans to pay off. The expected average return on long-term stock investments for retirement -- meaning the amount an investor's stocks will increase in value -- is about 7% a year (though that can vary widely year to year based on market conditions). So you can assume that's what you'll earn on average when you invest mostly in stocks as a 20-something with a 401(k) or a Roth IRA. Pay off a loan with a 4.29% interest rate, for instance, and you'll earn 4.29% of your loan's value each year it's paid off. That's less than the 7% you'd earn by investing in stocks for retirement. If your loans have low interest rates, you could make more money if you invest instead, perhaps in a Roth IRA after you've maxed out your employer match in a 401(k). What's next? If you're ready to pay extra toward your loans: Call your student loan servicer and find out how to make a larger payment. In most cases, it's easiest to log in to your online account and pick the loan or loan group you want to apply your additional payment to. Check out NerdWallet's tips on how to work with these four loan servicers: FedLoan Servicing Great Lakes Navient Nelnet Private lenders, including Wells Fargo, Citibank and Discover, have their own systems for applying extra payments toward your loans. Contact your lender to make sure your money goes where you want it to. If you're ready to put extra toward retirement: Increase your contributions to your company's retirement plan beyond the employer match. Consider additional 1% increases to your contributions whenever you get a raise or at the start of each year. NerdWallet's resources can also help you pick a Roth IRA account provider if you don't have a 401(k), don't get an employer match or have the means to save extra. Make sure to choose a plan with low fees, and with a small or $0 initial account minimum if you don't have much to put in the account to start. Most importantly, congratulate yourself for thinking critically about how to spend the money you're earning now that you've graduated. It's not easy to choose saving for retirement or paying off your loans over vacations or dinners out. But once you're on the right track with your savings, you'll feel empowered knowing your future self is taken care of. Brianna McGurran is a staff writer at NerdWallet. Email: [email protected] Twitter: @briannamcscribe. Photo credit: COD Newsroom/Flickr. Sign up for NerdWallet Grad's weekly newsletter to get career and money advice delivered right to your inbox. -- This feed and its contents are the property of The Huffington Post, and use is subject to our terms. It may be used for personal consumption, but may not be distributed on a website.

02 декабря 2015, 00:40

The Obama Administration Wants To Bypass Student Loan Servicers

The Department of Education soon will allow Americans with federal student loans to bypass the department's contractors and make payments directly to the government, avoiding loan servicers accused of routinely mistreating and misleading borrowers. Officials "will implement a single Department of Education student loan portal for all borrowers ... hoping to make things clearer, simpler and less confusing for every borrower," according to Undersecretary of Education Ted Mitchell, who addressed college financial aid administrators in Las Vegas on Tuesday. The audience can be heard applauding his announcement in a video recording. Colleges, their financial aid employees, and state and federal regulators routinely complain about the level of customer service student borrowers receive from the Education Department's loan contractors.  In March, President Barack Obama directed the department to create a website after consumer advocates accused his administration of failing to help borrowers who were being abused. The Consumer Financial Protection Bureau said in September that student loan servicing, or the business of collecting borrowers' monthly payments and counseling them on their repayment options, was riddled with "widespread failures." Borrowers often can't get basic information from their servicers, the bureau said, and they're regularly pushed into default. Mitchell told financial aid counselors that the centralized portal was coming "in response to your feedback." He didn't say when the new website would be available. (function(){var src_url="https://spshared.5min.com/Scripts/PlayerSeed.js?playList=518156348&height=&width=100&sid=577&origin=SOLR&videoGroupID=155847&relatedNumOfResults=100&responsive=true&ratio=wide&align=center&relatedMode=2&relatedBottomHeight=60&companionPos=&hasCompanion=false&autoStart=false&colorPallet=%23FFEB00&videoControlDisplayColor=%23191919&shuffle=0&isAP=1&pgType=cmsPlugin&pgTypeId=addToPost-top&onVideoDataLoaded=track5min.DL&onTimeUpdate=track5min.TC&onVideoDataLoaded=HPTrack.Vid.DL&onTimeUpdate=HPTrack.Vid.TC";if (typeof(commercial_video) == "object") {src_url += "&siteSection="+commercial_video.site_and_category;if (commercial_video.package) {src_url += "&sponsorship="+commercial_video.package;}}var script = document.createElement("script");script.src = src_url;script.async = true;var placeholder = document.querySelector(".js-fivemin-script");placeholder.parentElement.replaceChild(script, placeholder);})(); The website potentially threatens Education Department loan contractors such as Navient Corporation and Nelnet Inc., who are currently waiting to negotiate their contracts with the Education Department. The department was supposed to begin renegotiating its loan servicing contracts this year, but has pushed negotiations into 2016.  Under the present system, borrowers have to go through companies like Navient to repay their loans. While borrowers can check the Education Department's National Student Loan Data System to learn how much money in student loans they've taken out or begin the process of enrolling in plans that enable them to make smaller payments based on their monthly earnings, they can't see a history of their payments. Navient warned investors in its latest annual report that changes to its Education Department contract "could have a material adverse effect on Navient’s revenues, cash flows, profitability and business outlook, and, as a result, could materially adversely affect its business, financial condition and results of operations." The Education Department expects to pay its loan servicers $804 million this year, Dorie Nolt, a department spokeswoman, said in August. Patricia Christel, a Navient spokeswoman, didn't immediately respond to a request for comment. Earlier this year, the Obama administration said a single consumer-facing website for federal student loan borrowers -- where they could access their account information, learn about various repayment options and make monthly payments -- could "improve the borrower experience." Borrowers surveyed by the Education Department routinely rate the department's loan contractors as below average. Requiring loan contractors to use a single system also could "reduce the burdens associated with coordinating consistent student loan servicing contractor behavior, reduce the challenges of transferring loans between contractors, and provide reporting and system integration benefits to the Department of Education," the administration said. Some consumer advocates have been pushing the Education Department to bring its loan servicing operations in-house, arguing that the federal government is wasting money on loan contractors that provide minimal service. In response, the Treasury Department recently launched a pilot program in which federal employees are tasked with collecting payments from severely delinquent borrowers.  Also on HuffPost: -- This feed and its contents are the property of The Huffington Post, and use is subject to our terms. It may be used for personal consumption, but may not be distributed on a website.

02 декабря 2015, 00:40

The Obama Administration Wants To Bypass Student Loan Servicers

The Department of Education soon will allow Americans with federal student loans to bypass the department's contractors and make payments directly to the government, avoiding loan servicers accused of routinely mistreating and misleading borrowers. Officials "will implement a single Department of Education student loan portal for all borrowers ... hoping to make things clearer, simpler and less confusing for every borrower," according to Undersecretary of Education Ted Mitchell, who addressed college financial aid administrators in Las Vegas on Tuesday. The audience can be heard applauding his announcement in a video recording. Colleges, their financial aid employees, and state and federal regulators routinely complain about the level of customer service student borrowers receive from the Education Department's loan contractors.  In March, President Barack Obama directed the department to create a website after consumer advocates accused his administration of failing to help borrowers who were being abused. The Consumer Financial Protection Bureau said in September that student loan servicing, or the business of collecting borrowers' monthly payments and counseling them on their repayment options, was riddled with "widespread failures." Borrowers often can't get basic information from their servicers, the bureau said, and they're regularly pushed into default. Mitchell told financial aid counselors that the centralized portal was coming "in response to your feedback." He didn't say when the new website would be available. (function(){var src_url="https://spshared.5min.com/Scripts/PlayerSeed.js?playList=518156348&height=&width=100&sid=577&origin=SOLR&videoGroupID=155847&relatedNumOfResults=100&responsive=true&ratio=wide&align=center&relatedMode=2&relatedBottomHeight=60&companionPos=&hasCompanion=false&autoStart=false&colorPallet=%23FFEB00&videoControlDisplayColor=%23191919&shuffle=0&isAP=1&pgType=cmsPlugin&pgTypeId=addToPost-top&onVideoDataLoaded=track5min.DL&onTimeUpdate=track5min.TC&onVideoDataLoaded=HPTrack.Vid.DL&onTimeUpdate=HPTrack.Vid.TC";if (typeof(commercial_video) == "object") {src_url += "&siteSection="+commercial_video.site_and_category;if (commercial_video.package) {src_url += "&sponsorship="+commercial_video.package;}}var script = document.createElement("script");script.src = src_url;script.async = true;var placeholder = document.querySelector(".js-fivemin-script");placeholder.parentElement.replaceChild(script, placeholder);})(); The website potentially threatens Education Department loan contractors such as Navient Corporation and Nelnet Inc., who are currently waiting to negotiate their contracts with the Education Department. The department was supposed to begin renegotiating its loan servicing contracts this year, but has pushed negotiations into 2016.  Under the present system, borrowers have to go through companies like Navient to repay their loans. While borrowers can check the Education Department's National Student Loan Data System to learn how much money in student loans they've taken out or begin the process of enrolling in plans that enable them to make smaller payments based on their monthly earnings, they can't see a history of their payments. Navient warned investors in its latest annual report that changes to its Education Department contract "could have a material adverse effect on Navient’s revenues, cash flows, profitability and business outlook, and, as a result, could materially adversely affect its business, financial condition and results of operations." The Education Department expects to pay its loan servicers $804 million this year, Dorie Nolt, a department spokeswoman, said in August. Patricia Christel, a Navient spokeswoman, didn't immediately respond to a request for comment. Earlier this year, the Obama administration said a single consumer-facing website for federal student loan borrowers -- where they could access their account information, learn about various repayment options and make monthly payments -- could "improve the borrower experience." Borrowers surveyed by the Education Department routinely rate the department's loan contractors as below average. Requiring loan contractors to use a single system also could "reduce the burdens associated with coordinating consistent student loan servicing contractor behavior, reduce the challenges of transferring loans between contractors, and provide reporting and system integration benefits to the Department of Education," the administration said. Some consumer advocates have been pushing the Education Department to bring its loan servicing operations in-house, arguing that the federal government is wasting money on loan contractors that provide minimal service. In response, the Treasury Department recently launched a pilot program in which federal employees are tasked with collecting payments from severely delinquent borrowers.  Also on HuffPost: -- This feed and its contents are the property of The Huffington Post, and use is subject to our terms. It may be used for personal consumption, but may not be distributed on a website.

16 октября 2015, 01:25

Robocalls Emerge As Latest Fix For Nation's Student Loan Crisis

The Obama administration and the student loan industry reckon they know how to fix America’s student debt crisis: Bombard Americans’ cell phones with robocalls and text messages telling them to pay up. With total student debt nearing $1.3 trillion and 1 in 4 borrowers either delinquent or in default, according to the Federal Reserve and the Consumer Financial Protection Bureau, policymakers are grasping for proposals that would stop the relentless rise in late payments and distress that’s afflicting the nation’s more than 40 million student loan borrowers.  While the Great Recession and the subsequent lackluster economic recovery play a role, the CFPB and consumer groups claim that sloppy loan servicing practices have exacerbated the situation by depriving borrowers of their right to make affordable monthly payments on their federal loans. More than 90 percent of all student loans are either owned or backed by the Department of Education and the department’s loan contractors have a business incentive to cut costs and minimize the amount of time they spend on the phone with borrowers seeking help, consumer advocates have told the CFPB. Instead of cracking down on alleged abuses, the Education Department wants to give its loan contractors more power. In doing so, the department is aiding their quest to maintain profitability -- its four largest loan servicers have generated at least $5 billion in combined income over the last three years -- at a time when consumer groups argue the loan companies need to hire more workers and better train them. In several notices filed over the past year with the Federal Communications Commission, trade associations representing loan specialists, debt collectors, college administrators and financial aid counselors have tried to persuade the agency to exempt federal student loans from typical consumer protections. They reason that “millions” of loan defaults could be averted if contractors working for the Education Department were permitted to use computerized auto-dialers to call and text borrowers on their cell phones.  Since cell phone owners are charged for calls and texts they receive, the FCC has generally not permitted companies to auto-dial consumers when they haven't given consent. Nearly half of American households eschewed land lines to rely solely on cell phones, according to a recent survey by the National Center for Health Statistics. In April, one of the Education Department’s main contractors -- Nelnet Inc. -- told the FCC that borrowers they were able to auto-dial were less likely than others to fall behind on their payments or default and were more likely to resolve delinquencies. The Education Department agrees, and told the White House in an Oct. 1 report that Congress should change the Telephone Consumer Protection Act to allow the department’s loan contractors to contact borrowers “and help them get into the right repayment plan and avoid the consequences of default or resolve their default.” With so many Americans, particularly young ones, relying solely on cell phones, President Barack Obama has long sought to allow the government's loan servicers to auto-dial them, and included the provision in his last several annual budget requests to Congress. In 2010, the Education Department told the FCC that taxpayers and colleges would benefit from a change because loan servicers can place many more calls using auto-dialers than when their employees manually dial, increasing their ability to prevent defaults, according to a written summary of the meeting. Neither Congress nor the FCC have agreed to the White House’s requests. The problem, according to consumer advocates and regulators, is that there’s little evidence that opening up borrowers’ cell phones to relentless calls and text messages would help. The White House estimates the proposal, if enacted into law, would generate just $12 million annually in additional government revenue -- a far cry from industry claims that it would let close to 12 million borrowers avoid default over the next decade and help another 8 million correct their defaults. A federal consumer bureau analysis of borrowers’ complaints suggests that even when borrowers get on the phone with their loan servicer they often receive wrong information or otherwise aren’t properly informed of all their options to avoid distress, such as federal plans that allow them to make monthly payments based on their income. Borrowers are so misinformed that Chris Hicks, who leads the Debt-Free Future campaign at the advocacy group Jobs With Justice, has led seminars in more than a dozen cities with hundreds of borrowers in an effort to tell them about repayment plans that could cut their required monthly payments by hundreds of dollars. Robocalls are among the most frequent sources of consumer complaints, according to the Federal Trade Commission and the FCC. In July, the CFPB accused Discover Financial Services of placing more than 150,000 calls demanding payment to private student loan borrowers' cell phones at inconvenient times, such as before 8 a.m. or after 9 p.m. The bank agreed to a settlement, though it neither admitted to nor denied the allegations. Consumer advocates’ arguments haven’t persuaded the Education Department, which has gone around Congress and the FCC by simply requiring borrowers to consent to auto-dialed calls and messages at the time they sign their paperwork to take out federal student loans. Dorie Nolt, an Education Department spokeswoman, didn’t respond to a request for comment. Since at least August 2009, borrowers have agreed to be contacted via auto-dialers on any present or future numbers they provide to their colleges, the Education Department or their contractors when signing the Education Department’s master promissory note at the time they take out loans. Borrowers have taken out at least $602 billion in federal student loans that has required them to consent to receive calls, texts or pre-recorded messages via auto-dialers. That amount represents more than half of all outstanding federal student loans, according to Education Department data. The Education Department has further expanded the pool of borrowers that have given consent by including the provision in forms borrowers have to fill out in order to receive key benefits, such as the right to make monthly payments based on their earnings. The department also wants military members to grant consent when filling out applications to reduce the interest rate on their loans when they enter active duty, a right under the Servicemembers Civil Relief Act. But the pool of borrowers that can be contacted via auto-dialers remains small, said Michele Streeter, communications manager at the Education Finance Council, a Washington group that represents some student loan companies. Older federal loans’ master promissory notes didn’t include the auto-dial provision, Streeter said, and the consent that borrowers have given only applies to phone numbers they’ve provided. If a borrower changes phone numbers and doesn’t share the number with a loan company, his former school or the Education Department, loan specialists aren’t legally allowed to contact them using auto-dialers. Furthermore, Streeter said, with so many young Americans changing their phone numbers, loan companies fear that if they auto-dial the wrong cell phone the recipient could sue them for damages under the Telephone Consumer Protection Act. The Education Finance Council and the National Council of Higher Education Resources -- trade associations that represent student loan companies -- have been lobbying Congress to change the law and increase their members’ ability to use auto-dialers to contact borrowers’ cell phones, arguing it would allow them to help distressed borrowers. “The cost of inaction is simply too high -- for borrowers and taxpayers alike,” they said in documents they’ve circulated on Capitol Hill. -- This feed and its contents are the property of The Huffington Post, and use is subject to our terms. It may be used for personal consumption, but may not be distributed on a website.

16 октября 2015, 01:25

Robocalls Emerge As Latest Fix For Nation's Student Loan Crisis

The Obama administration and the student loan industry reckon they know how to fix America’s student debt crisis: Bombard Americans’ cell phones with robocalls and text messages telling them to pay up. With total student debt nearing $1.3 trillion and 1 in 4 borrowers either delinquent or in default, according to the Federal Reserve and the Consumer Financial Protection Bureau, policymakers are grasping for proposals that would stop the relentless rise in late payments and distress that’s afflicting the nation’s more than 40 million student loan borrowers.  While the Great Recession and the subsequent lackluster economic recovery play a role, the CFPB and consumer groups claim that sloppy loan servicing practices have exacerbated the situation by depriving borrowers of their right to make affordable monthly payments on their federal loans. More than 90 percent of all student loans are either owned or backed by the Department of Education and the department’s loan contractors have a business incentive to cut costs and minimize the amount of time they spend on the phone with borrowers seeking help, consumer advocates have told the CFPB. Instead of cracking down on alleged abuses, the Education Department wants to give its loan contractors more power. In doing so, the department is aiding their quest to maintain profitability -- its four largest loan servicers have generated at least $5 billion in combined income over the last three years -- at a time when consumer groups argue the loan companies need to hire more workers and better train them. In several notices filed over the past year with the Federal Communications Commission, trade associations representing loan specialists, debt collectors, college administrators and financial aid counselors have tried to persuade the agency to exempt federal student loans from typical consumer protections. They reason that “millions” of loan defaults could be averted if contractors working for the Education Department were permitted to use computerized auto-dialers to call and text borrowers on their cell phones.  Since cell phone owners are charged for calls and texts they receive, the FCC has generally not permitted companies to auto-dial consumers when they haven't given consent. Nearly half of American households eschewed land lines to rely solely on cell phones, according to a recent survey by the National Center for Health Statistics. In April, one of the Education Department’s main contractors -- Nelnet Inc. -- told the FCC that borrowers they were able to auto-dial were less likely than others to fall behind on their payments or default and were more likely to resolve delinquencies. The Education Department agrees, and told the White House in an Oct. 1 report that Congress should change the Telephone Consumer Protection Act to allow the department’s loan contractors to contact borrowers “and help them get into the right repayment plan and avoid the consequences of default or resolve their default.” With so many Americans, particularly young ones, relying solely on cell phones, President Barack Obama has long sought to allow the government's loan servicers to auto-dial them, and included the provision in his last several annual budget requests to Congress. In 2010, the Education Department told the FCC that taxpayers and colleges would benefit from a change because loan servicers can place many more calls using auto-dialers than when their employees manually dial, increasing their ability to prevent defaults, according to a written summary of the meeting. Neither Congress nor the FCC have agreed to the White House’s requests. The problem, according to consumer advocates and regulators, is that there’s little evidence that opening up borrowers’ cell phones to relentless calls and text messages would help. The White House estimates the proposal, if enacted into law, would generate just $12 million annually in additional government revenue -- a far cry from industry claims that it would let close to 12 million borrowers avoid default over the next decade and help another 8 million correct their defaults. A federal consumer bureau analysis of borrowers’ complaints suggests that even when borrowers get on the phone with their loan servicer they often receive wrong information or otherwise aren’t properly informed of all their options to avoid distress, such as federal plans that allow them to make monthly payments based on their income. Borrowers are so misinformed that Chris Hicks, who leads the Debt-Free Future campaign at the advocacy group Jobs With Justice, has led seminars in more than a dozen cities with hundreds of borrowers in an effort to tell them about repayment plans that could cut their required monthly payments by hundreds of dollars. Robocalls are among the most frequent sources of consumer complaints, according to the Federal Trade Commission and the FCC. In July, the CFPB accused Discover Financial Services of placing more than 150,000 calls demanding payment to private student loan borrowers' cell phones at inconvenient times, such as before 8 a.m. or after 9 p.m. The bank agreed to a settlement, though it neither admitted to nor denied the allegations. Consumer advocates’ arguments haven’t persuaded the Education Department, which has gone around Congress and the FCC by simply requiring borrowers to consent to auto-dialed calls and messages at the time they sign their paperwork to take out federal student loans. Dorie Nolt, an Education Department spokeswoman, didn’t respond to a request for comment. Since at least August 2009, borrowers have agreed to be contacted via auto-dialers on any present or future numbers they provide to their colleges, the Education Department or their contractors when signing the Education Department’s master promissory note at the time they take out loans. Borrowers have taken out at least $602 billion in federal student loans that has required them to consent to receive calls, texts or pre-recorded messages via auto-dialers. That amount represents more than half of all outstanding federal student loans, according to Education Department data. The Education Department has further expanded the pool of borrowers that have given consent by including the provision in forms borrowers have to fill out in order to receive key benefits, such as the right to make monthly payments based on their earnings. The department also wants military members to grant consent when filling out applications to reduce the interest rate on their loans when they enter active duty, a right under the Servicemembers Civil Relief Act. But the pool of borrowers that can be contacted via auto-dialers remains small, said Michele Streeter, communications manager at the Education Finance Council, a Washington group that represents some student loan companies. Older federal loans’ master promissory notes didn’t include the auto-dial provision, Streeter said, and the consent that borrowers have given only applies to phone numbers they’ve provided. If a borrower changes phone numbers and doesn’t share the number with a loan company, his former school or the Education Department, loan specialists aren’t legally allowed to contact them using auto-dialers. Furthermore, Streeter said, with so many young Americans changing their phone numbers, loan companies fear that if they auto-dial the wrong cell phone the recipient could sue them for damages under the Telephone Consumer Protection Act. The Education Finance Council and the National Council of Higher Education Resources -- trade associations that represent student loan companies -- have been lobbying Congress to change the law and increase their members’ ability to use auto-dialers to contact borrowers’ cell phones, arguing it would allow them to help distressed borrowers. “The cost of inaction is simply too high -- for borrowers and taxpayers alike,” they said in documents they’ve circulated on Capitol Hill. -- This feed and its contents are the property of The Huffington Post, and use is subject to our terms. It may be used for personal consumption, but may not be distributed on a website.

18 сентября 2015, 13:00

Struggling Borrowers At Higher Risk Of Default As Education Department Resists Recommendations

Millions of Americans are more likely to default on their federal student loans because the Education Department refuses to tell them they’re eligible to make lower monthly payments, according to a blistering report released Thursday by the Government Accountability Office. The report comes as borrowers with loans directly from the Education Department are increasingly falling behind on their debts, risking a lifetime of wage garnishments and ruined credit profiles as a result. Consumer advocates blame the department’s loan contractors, which collect monthly payments and counsel borrowers on repayment, for failing to inform borrowers of their options. In fact, according to the GAO, in 2012 the Treasury Department found that about 70 percent of borrowers in default on their federal student loans qualified for plans that enabled them to make payments based on their earnings. Many of those borrowers probably qualified for the plans before they defaulted, providing evidence for a concern voiced by Deputy Treasury Secretary Sarah Bloom Raskin in April of last year, when she challenged the Education Department and its loan servicers for high rates of borrower defaults given the existence of generous repayment plans. With nearly 41 million Americans collectively owing nearly $1.2 trillion on their federal student loans, according to Education Department data, concerns are mounting in Washington that those debts risk slowing economic growth as borrowers delay purchases and investments in order to repay Uncle Sam, or instead default on the loans after failing to secure jobs that would enable them to make good on their obligations. The GAO, Congress’s in-house watchdog, recommended that the Education Department and its contracted loan servicers proactively tell borrowers on a regular basis that they could be eligible to annually save thousands of dollars on their loan payments. The office determined too many eligible borrowers didn’t know about the plans as a result of ineffective outreach efforts by the department and inconsistent communications from the department’s loan contractors. A top department official, James Runcie, rejected the recommendation in his written response to the report, claiming that it could lead to “imprudent” decisions by borrowers. Enrollment in income plans has more than doubled over the past two years to 3.9 million borrowers, but the GAO cited 2012 estimates by the Treasury Department, and its own interviews with borrowers, to argue that many borrowers are unaware of this option. The watchdog’s report, the result of a nearly two-year audit, lays bare what many borrower advocates have been arguing for years: The Education Department, led by Secretary Arne Duncan, is simply unwilling to take necessary steps to help distressed student loan borrowers. “The Department of Education and its student loan servicers aren't doing enough to help struggling borrowers. It's that simple,” said Chris Hicks, who leads the Debt-Free Future campaign at the advocacy group Jobs With Justice. “If the department continues this inaction and refuses to hold its servicers to a higher standard, millions will suffer, and working people won't be able to make ends meet. This is the legacy that Secretary Duncan is leaving behind.” Instead of heeding calls from President Barack Obama to ensure that eligible borrowers know about plans enabling them to make monthly payments based on their earnings, “borrowers must actively seek information” about them, the GAO said. Just three of the 14 borrowers interviewed by the congressional watchdog either had a good understanding of the income plans or had been told about them by their loan servicer. Runcie, the Education Department official, said the report overstated the degree to which borrowers are unaware of the income plans. The report, which largely relies on data available as of last September, also doesn’t reflect recent efforts by the department, he said. Furthermore, Runcie added, it wasn’t clear that telling all borrowers about all their options would be the “most efficient or effective way” to help borrowers manage their debts. Obama has repeatedly chided the Education Department for borrowers’ general lack of awareness about the income plans. He’s written at least two memorandums to Duncan urging him to do more. The department expects to pay its loan servicers $804 million this year, in part to help borrowers pick repayment plans best suited for their financial circumstances. But the Education Department hasn’t been regularly notifying borrowers whose loans have come due about the income plans, according to the GAO. It also hasn’t examined the effectiveness of its outreach efforts to borrowers. One of the department’s loan contractors, which services nearly a quarter of the department’s loans, representing more than 5 million borrower accounts, doesn’t tell borrowers about an existing plan that enables those working in public service to have their debts forgiven tax-free after 10 years of payments. Borrowers first have to request the information. As a result, eligible borrowers could be paying extra on their loans, are at greater risk of missing payments, and could be forgoing thousands of dollars in eventual loan forgiveness. Borrowers enrolled in income plans generally make little money. About three-quarters of borrowers in the two most popular plans, Income Based Repayment and Pay As You Earn, earn less than $20,000, according to the report. The vast majority of borrowers in the income plans also are repaying only undergraduate loans, echoing previous findings. The findings refute hypothetical scenarios offered by researchers at the Brookings Institution and the New America Foundation that well-off borrowers or those with graduate degrees are taking advantage of the plans. Department officials told the GAO they haven’t targeted borrowers eligible for the Public Service Loan Forgiveness plan because they can’t identify them based on existing information. In its report, the GAO said that made it even more important for the department and its loan contractors to proactively remind all borrowers about this option. About 4 million borrowers with loans directly from the Education Department may be employed in public service, the GAO estimated in its report. But only about 147,000 were enrolled in the public service plan. “The gap between participation and eligibility and [the department’s] own assessment of borrower feedback suggests that borrowers are not receiving sufficient information about income-driven repayment plans,” according to the report. For the public service plan, the Education Department “has little assurance that borrowers know about the program, given that it has not assessed its efforts to raise awareness and relatively few borrowers” are enrolled. The Education Department’s failings could be causing otherwise avoidable defaults. “Increasing enrollment in income-driven repayment plans is a potent weapon to tame the student loan default crisis,” said Rohit Chopra, formerly the top student loan official at the federal Consumer Financial Protection Bureau. The report, he added, “provides further evidence that servicers may be hiding the ball to protect their bottom line.” Borrowers in Income Based Repayment and Pay As You Earn rarely default, according to the report. For those whose loans came due between 2010 and 2014, less than 1 percent had defaulted. Borrowers making payments based on the amount they owe defaulted at a 14 percent clip. Spokespeople for the Education Department’s four major loan servicers -- Navient Corp., Nelnet Inc., Great Lakes Higher Education Corp. & Affiliates, and Pennsylvania Higher Education Assistance Agency, which is more commonly known as FedLoan Servicing -- either didn’t respond to requests for comment or referred inquiries to the Education Department. Education Department officials “appear unable or unwilling to provide the direction needed to servicers,” said Maura Dundon, senior policy counsel at the Center for Responsible Lending. “We can’t allow defaults and delinquencies caused by poor servicing to continue. In this age of increasing tuitions, increased need for a college degree, decreasing real wages, and increased costs for basics like childcare and houses, students need to know that they have safety net if they attempt a college degree.” -- This feed and its contents are the property of The Huffington Post, and use is subject to our terms. It may be used for personal consumption, but may not be distributed on a website.

18 сентября 2015, 13:00

Struggling Borrowers At Higher Risk Of Default As Education Department Resists Recommendations

Millions of Americans are more likely to default on their federal student loans because the Education Department refuses to tell them they’re eligible to make lower monthly payments, according to a blistering report released Thursday by the Government Accountability Office. The report comes as borrowers with loans directly from the Education Department are increasingly falling behind on their debts, risking a lifetime of wage garnishments and ruined credit profiles as a result. Consumer advocates blame the department’s loan contractors, which collect monthly payments and counsel borrowers on repayment, for failing to inform borrowers of their options. In fact, according to the GAO, in 2012 the Treasury Department found that about 70 percent of borrowers in default on their federal student loans qualified for plans that enabled them to make payments based on their earnings. Many of those borrowers probably qualified for the plans before they defaulted, providing evidence for a concern voiced by Deputy Treasury Secretary Sarah Bloom Raskin in April of last year, when she challenged the Education Department and its loan servicers for high rates of borrower defaults given the existence of generous repayment plans. With nearly 41 million Americans collectively owing nearly $1.2 trillion on their federal student loans, according to Education Department data, concerns are mounting in Washington that those debts risk slowing economic growth as borrowers delay purchases and investments in order to repay Uncle Sam, or instead default on the loans after failing to secure jobs that would enable them to make good on their obligations. The GAO, Congress’s in-house watchdog, recommended that the Education Department and its contracted loan servicers proactively tell borrowers on a regular basis that they could be eligible to annually save thousands of dollars on their loan payments. The office determined too many eligible borrowers didn’t know about the plans as a result of ineffective outreach efforts by the department and inconsistent communications from the department’s loan contractors. A top department official, James Runcie, rejected the recommendation in his written response to the report, claiming that it could lead to “imprudent” decisions by borrowers. Enrollment in income plans has more than doubled over the past two years to 3.9 million borrowers, but the GAO cited 2012 estimates by the Treasury Department, and its own interviews with borrowers, to argue that many borrowers are unaware of this option. The watchdog’s report, the result of a nearly two-year audit, lays bare what many borrower advocates have been arguing for years: The Education Department, led by Secretary Arne Duncan, is simply unwilling to take necessary steps to help distressed student loan borrowers. “The Department of Education and its student loan servicers aren't doing enough to help struggling borrowers. It's that simple,” said Chris Hicks, who leads the Debt-Free Future campaign at the advocacy group Jobs With Justice. “If the department continues this inaction and refuses to hold its servicers to a higher standard, millions will suffer, and working people won't be able to make ends meet. This is the legacy that Secretary Duncan is leaving behind.” Instead of heeding calls from President Barack Obama to ensure that eligible borrowers know about plans enabling them to make monthly payments based on their earnings, “borrowers must actively seek information” about them, the GAO said. Just three of the 14 borrowers interviewed by the congressional watchdog either had a good understanding of the income plans or had been told about them by their loan servicer. Runcie, the Education Department official, said the report overstated the degree to which borrowers are unaware of the income plans. The report, which largely relies on data available as of last September, also doesn’t reflect recent efforts by the department, he said. Furthermore, Runcie added, it wasn’t clear that telling all borrowers about all their options would be the “most efficient or effective way” to help borrowers manage their debts. Obama has repeatedly chided the Education Department for borrowers’ general lack of awareness about the income plans. He’s written at least two memorandums to Duncan urging him to do more. The department expects to pay its loan servicers $804 million this year, in part to help borrowers pick repayment plans best suited for their financial circumstances. But the Education Department hasn’t been regularly notifying borrowers whose loans have come due about the income plans, according to the GAO. It also hasn’t examined the effectiveness of its outreach efforts to borrowers. One of the department’s loan contractors, which services nearly a quarter of the department’s loans, representing more than 5 million borrower accounts, doesn’t tell borrowers about an existing plan that enables those working in public service to have their debts forgiven tax-free after 10 years of payments. Borrowers first have to request the information. As a result, eligible borrowers could be paying extra on their loans, are at greater risk of missing payments, and could be forgoing thousands of dollars in eventual loan forgiveness. Borrowers enrolled in income plans generally make little money. About three-quarters of borrowers in the two most popular plans, Income Based Repayment and Pay As You Earn, earn less than $20,000, according to the report. The vast majority of borrowers in the income plans also are repaying only undergraduate loans, echoing previous findings. The findings refute hypothetical scenarios offered by researchers at the Brookings Institution and the New America Foundation that well-off borrowers or those with graduate degrees are taking advantage of the plans. Department officials told the GAO they haven’t targeted borrowers eligible for the Public Service Loan Forgiveness plan because they can’t identify them based on existing information. In its report, the GAO said that made it even more important for the department and its loan contractors to proactively remind all borrowers about this option. About 4 million borrowers with loans directly from the Education Department may be employed in public service, the GAO estimated in its report. But only about 147,000 were enrolled in the public service plan. “The gap between participation and eligibility and [the department’s] own assessment of borrower feedback suggests that borrowers are not receiving sufficient information about income-driven repayment plans,” according to the report. For the public service plan, the Education Department “has little assurance that borrowers know about the program, given that it has not assessed its efforts to raise awareness and relatively few borrowers” are enrolled. The Education Department’s failings could be causing otherwise avoidable defaults. “Increasing enrollment in income-driven repayment plans is a potent weapon to tame the student loan default crisis,” said Rohit Chopra, formerly the top student loan official at the federal Consumer Financial Protection Bureau. The report, he added, “provides further evidence that servicers may be hiding the ball to protect their bottom line.” Borrowers in Income Based Repayment and Pay As You Earn rarely default, according to the report. For those whose loans came due between 2010 and 2014, less than 1 percent had defaulted. Borrowers making payments based on the amount they owe defaulted at a 14 percent clip. Spokespeople for the Education Department’s four major loan servicers -- Navient Corp., Nelnet Inc., Great Lakes Higher Education Corp. & Affiliates, and Pennsylvania Higher Education Assistance Agency, which is more commonly known as FedLoan Servicing -- either didn’t respond to requests for comment or referred inquiries to the Education Department. Education Department officials “appear unable or unwilling to provide the direction needed to servicers,” said Maura Dundon, senior policy counsel at the Center for Responsible Lending. “We can’t allow defaults and delinquencies caused by poor servicing to continue. In this age of increasing tuitions, increased need for a college degree, decreasing real wages, and increased costs for basics like childcare and houses, students need to know that they have safety net if they attempt a college degree.” -- This feed and its contents are the property of The Huffington Post, and use is subject to our terms. It may be used for personal consumption, but may not be distributed on a website.