Will a recent CFPB decision limit collection of your student loans?
Student loan forgiveness may be possible for some borrowers, particularly if the collection paperwork is incomplete or inaccurate.
The Consumer Financial Protection Bureau (CFPB) recently took action against one of the nation’s largest holders of private (not government-backed) student loans. The potentially precedential CFPB action against the National Collegiate Trusts could mean that tens of thousands of borrowers, both current and former students, could see their loan balance decrease dramatically or be forgiven altogether. In addition, the National Collegiate Trusts must pay restitution to many borrowers who’ve already gone through unfair collections and pay civil penalties to the government.
The settlement comes after a years-long investigation and audit by the CFPB. Complaints made to the CFPB by borrowers themselves and by consumer debt defense attorneys alleging sloppy record-keeping and improper practices led to the investigation. Allegations of wrongdoing included:
- Not having original, signed loan documentation;
- Bringing repeated collection lawsuits in spite of inadequate records;
- Not being able to show that they are the true holder of the debt (some debt gets reassigned to collection agencies, for example, who are given little or no original documentation but then try to bring suit upon borrower default, and other debts are sold through multiple trusts or investment firms, with much of the original paperwork lost on transfer); and
- “Robo-signing” practices.
For-profit schools and debt forgiveness
Student loan debt is at an all-time high across America. There is more than $1.4 trillion in debt currently, held by approximately 44 million of us attending or who have attended public universities, private colleges, and trade schools (like those teaching cosmetology, plumbing, welding, mechanics, etc.).
Students previously enrolled at the now-defunct Corinthian College chain of schools may soon find all or a major part of their student loan debt forgiven. The forgiveness comes as part of another CFPB settlement, and could benefit thousands of students who fell prey to the school’s predatory lending schemes to the tune of $183.3 million.
The Obama administration had established a program arranging debt forgiveness for students who attended other for-profit schools accused of similar wrongdoing, but current Secretary of Education Betsy DeVoss has delayed its implementation.
Other ways to find student loan debt relief
If either of these two major debt forgiveness actions don’t affect your debt, don’t despair. There are still other ways you can find relief from student loan debt.
In some instances, you can seek forbearance of loans by making an appeal directly to your lender. Forbearances – basically putting your payments “on hold” – are appropriate in the event of job loss, serious illness or a significant decrease in your income. The break from student loan payments can give you an opportunity to rearrange your budget. But, remember, the monthly interest will continue to accrue.
Some student loan lenders will also refinance your loans, even if you have bad credit. This can lead to much lower payments, depending on your income, the amount of money you owe, the current amount of your payments and the time remaining for you to finish paying.
Student loans are not usually discharged in bankruptcy, unless you can prove “undue hardship” or “extreme hardship.” However, discharging other debts (like credit cards, medical bills, auto payments, etc.) through a Chapter 7 or Chapter 13 bankruptcy could free up the funds you need to make student loan payments.
If you’d like more information about a bankruptcy filing – and what it could mean for your student loan debt – contact the skilled bankruptcy attorneys at the Miami law offices of Kingcade Garcia McMaken. Call the firm today at 305-285-9100 or email them to set up your free initial consultation. Spanish speaking services are available.