Tampa Student Loan and Bankruptcy Lawyer Blog — March 21, 2020
I’m hearing President Trump move the federal student loan program to the Small Business Administration (SBA). I also heard today that the SBA is cutting its workforce by 40%. Interesting. I admit I expected big changes, but this wasn’t on my bingo card. This change will probably only make this more apparent. I would hate to have a degree result in unemployment or underemployment, and then default on a SBA loan. The SBA is known for being tough when it comes to negotiating past due balances. I don’t really know how they would integrate all the Income Driven Plans, and the other oddities of the federal system. Maybe they won’t, or they will only do what Congress has passed like IBR and PSLF. I know that a few years ago, the Inspector General’s Office released a report stating that 62% of federal student loan servicers were doing something wrong. The bar is low for doing it correctly. I used to think that if I cited a wrong law or did something 62% of the times, the Florida Bar was likely to disbar me. It has been so complex for years. I don’t know how anyone can keep track or know what to say half the time. I’ve brushed up on my knowledge of forbearances just in case. Some people are getting outrageously high monthly student loan bills based on the Standard plan. You can search for administrative forbearance by clicking on this link. Although I’m not an advocate of forbearance it is better than defaulting if there are no other options. If a borrower is unable to recertify income or can’t get into IBR in the interim, they should be put on a discretionary repayment plan if one is still available. Forbearance is allowed for a maximum of 36 months per loan. Click the blue box to request that we review your loans and make recommendations or discuss your options. Or call us at 813-258-2808.
They key is don’t ignore your loans. Federal student loans are subject to a 6.9% interest rate, which is relatively high, and there is no statute of limitation. A default can also severely damage your credit. Federal student loans that are defaulted have fewer options and add 25% to your balance. I read that over 40% of borrowers were delinquent on their federal student loans. I believe it was 43%. You can be in default for up to 9 months (270 day). Once you default, it’s not possible to catch up on a loan. You must consolidate or rehabilitate the loan. I call them “get out jail cards”. If you’ve done both, it is still possible to cure a bankruptcy default if you have already done them. But that’s all. I wouldn’t want to default my entire life. You could be garnished by letter, which may have been sent to an old address and was lost. No warning. Social security offset. Tax refund gone. Credit score lower means higher everything. I read that some people say that if the Department of Education doesn’t exist, they won’t need to repay their loan. Or they will simply decide not to. Consider this carefully. I can’t imagine a worse option in most cases to deal with student loan debt! If you act quickly, there’s usually an option that is legal and beneficial to deal with student loans.
