Breaking Down Barriers to Predatory Student Loan Forgiveness

Breaking down barriers to predatory student loan forgiveness requires a deep understanding of the complex issues at play. The average student debt load in the US has surpassed $31,300, with many borrowers struggling to make ends meet.

Many predatory lenders have taken advantage of this vulnerability, offering loans with exorbitant interest rates and fees that can quickly balloon into unmanageable amounts. For example, some lenders have been known to charge interest rates as high as 25% or more.

To qualify for forgiveness, borrowers must first meet the eligibility criteria, which can be a daunting task. According to the Department of Education, borrowers must have made 120 qualifying payments over 10 years to be eligible for Public Service Loan Forgiveness (PSLF).

This can be a significant burden for borrowers who are already struggling to make ends meet, and it's not uncommon for borrowers to be unaware of the eligibility requirements. In fact, a recent study found that over 70% of borrowers were not aware of the PSLF program.

Income-driven repayment plans can be a game-changer for borrowers struggling to make payments. Borrowers can base their monthly student loan payments on their income, with payments ranging from 10-20% of discretionary income.

Low-income borrowers may have a monthly income-driven payment as low as $0. This is a huge relief for those struggling to make ends meet.

If you're considering income-driven repayment, be sure to check out the resources on StudentAid.gov, including the Income-Driven Repayment Plans page, FAQs, and Loan Simulator.

Borrower defense to repayment is another option for those who feel they've been wronged by their school. This type of loan forgiveness is available to borrowers who attended a school that defrauded them in some way.

The process for borrower defense has been notoriously unclear, but recent changes under the Biden administration have brought more clarity to the process. If your application is approved, you can expect a partial or full discharge of your federal student loans.

Approved borrower defense applications may lead to complete cancellation of federal student loans, reimbursement of past monthly payments, federal student aid eligibility, and adjusting credit reporting to improve your credit score.

Here's a summary of what to expect if your borrower defense application is approved:

If your application was pending as of April 7, 2020, the Department of Education is required to approve or deny your application within 18 months, then grant any relief within 2 years of your application's approval.

To qualify for borrower defense, you must have borrowed federal student loans and prove that your school engaged in fraud or broke a state law. This can be a tough process, but a good indication of eligibility is if your school is being sued by the Education Department or state attorneys general.

You have three years from leaving the institution to file your claim, although this timeframe can vary depending on when your loans were disbursed and/or the state in which you live. To give you an idea, Ashford University was investigated or sued by attorneys general in 5 states for potential consumer protection law violations.

To qualify, you must claim financial harm related to your federal student loan or educational services, not personal expenses incurred while in school. Borrower defense is not granted for personal injury or harassment by school employees. If your federal student loans were disbursed before July 1, 2020, a legal judgment against your school may be used as the sole grounds for a borrower defense application.

Here's a rough idea of what to expect from the application process:

To be eligible for borrower defense, you must have borrowed federal student loans, as borrower defense does not work for private loans. If you're unsure, check your loan documents.

Borrower defense is not a guarantee, and you must prove that your institution engaged in fraud or broke a state law. This can be a challenge, but it's not impossible.

To qualify, your school must have intentionally misled you concerning its educational programs or job placement rates, or broken state laws, such as consumer protection statutes. You can't simply be unhappy with your school experience.

A great indicator of whether your school is eligible for borrower defense is if it's being or has been sued by the Education Department or state attorneys general. For example, Ashford University was investigated or sued by attorneys general in 5 states for potential consumer protection law violations and/or misleading and coercive recruitment practices.

You must file your claim within three years of leaving the institution, although this timeframe can vary depending on when your loans were disbursed and/or the state in which you live.

In some cases, a legal judgment against your school may be used as the sole grounds for a borrower defense application, but only if your federal student loans were disbursed before July 1, 2020.

Filling out the borrower defense application should take you 30-45 minutes, depending on how detailed you get in your description of how the school defrauded you.

It's a good idea to plan for a significant amount of time to complete the application accurately.

The Education Department has been known to go months without making any borrower defense decisions, and the application approval process may take months or even years.

You can contact the studentaid.gov Help Center or call the Borrower Defense Hotline at 1-855-279-6207 to check the status of your application.

Collecting the right documents is key to a successful borrower defense application. You'll need to gather all your transcripts from the school.

Make sure to include student manuals and course catalogs, as these may contain important information about your program. Enrollment agreements are also essential, so be sure to collect those as well.

Documentation of any fraudulent statements made by your school is crucial. This can include promotional materials that contain dishonest information, communication between you and faculty or admissions staff, and relevant legal documentation, such as past judgments against the school.

When documenting fraudulent or dishonest statements, pay close attention to anything referring to credit transferability, resources provided by the school, and actual employment rates versus what the school advertised. This will help you build a strong case for your borrower defense application.

Here's a list of the documents you'll need to collect:

Student loan debt has become a major obstacle for many students, with the average debt load per borrower exceeding $31,300 in the United States.

This staggering amount is largely due to the rising cost of higher education, which has increased by 1,100% since 1980.

The burden of student loan debt can be overwhelming, with many graduates struggling to make payments and build credit.

In fact, a study found that 40% of student loan borrowers are at least 90 days delinquent on their payments.

Consolidation can make monthly payments simpler or more affordable, but it may also extend repayment time and cause borrowers to lose some benefits.

You can consolidate federal student loans online with no fee or cost. Research your options before making a decision.

Income-driven repayment plans may not be necessary if you consolidate, but it's still worth exploring if you're eligible.

To consolidate federal student loans, you can visit StudentLoans.gov and fill out the Direct Consolidation loan application.

Consolidation may not be the best option for everyone, so it's essential to weigh the pros and cons before making a decision.

You can learn more about consolidation on StudentAid.gov and use the Loan Simulator to determine which plan is best for you.

Here are some key points to consider when consolidating federal student loans:

Race vs Debt is a pressing issue in the United States, with students of color disproportionately affected by student loan debt. Many for-profit colleges have targeted low-income students, service members, and students of color, leaving them saddled with debt.

Nearly half of for-profit college undergraduate students are students of color. 95 percent of Black students attending for-profit colleges took out student loans, and a staggering 75 percent of Black students who did not complete their program at a for-profit college defaulted.

Borrowers with delinquent payments can get back on track by lowering their monthly payments or seeking assistance through StudentAid.gov. Borrowers can also get out of default and avoid having their wages garnished or tax refunds withheld.

Black students are 20% more likely to borrow, often borrow more, and default at more than twice the rate of white students. The median white borrower owes just $1,000 20 years after starting college, while the median black borrower still owes $18,500 after two decades.

A borrower defense application can result in a refund of previous payments, but this largely depends on why the loan is eligible, what kind of financial harm is claimed, and when the application was submitted. For federal loans disbursed before July 1, 2017, applicable state laws generally allow borrowers to seek reimbursement for previous payments.

Disability discharge is an option for borrowers who are disabled and unable to work due to their condition. This type of discharge can provide relief from student loan debt.

Substantial gainful activity is a key factor in determining eligibility for disability discharge. According to the Social Security Administration, substantial gainful activity involves doing significant physical or mental work for pay or profit.

If you're unable to engage in substantial gainful activity, you may be eligible for disability discharge. Nelnet, a federal student loan servicing company, handles all Total and Permanent Disability (TPD) applications.

To apply for TPD, you'll need to submit an application to Nelnet. You can find more information on the application process on the Nelnet website.

Here are some resources to help you get started:

Student loan debt is a massive problem in the US, affecting millions of people. Only 43% of public two-year college students and 34% of for-profit college students who entered repayment on their loans in 2011 had paid even a dollar toward their loan principal after five years.

The burden of student debt is not distributed equally across all Americans, with Black and Latinx communities being hit especially hard. Half of Black borrowers and a third of Latinx borrowers default on their loans within 20 years.

For-profit colleges have targeted low-income students, service members, and students of color, leaving them saddled with debt. Nearly half of for-profit college undergraduate students are students of color.

Many borrowers can't afford their monthly payments, with some even defaulting on their loans. Borrowers who are currently behind on their loans, but have not yet defaulted, may be able to lower their monthly payments.

The good news is that there are options available for borrowers who are struggling to pay back their loans. Borrowers can base their monthly student loan payments on their income, with payments ranging from 10-20% of discretionary income. Low-income borrowers could have a monthly income-driven payment as low as $0.

If you attended a school that was found guilty of fraud, such as ITT Tech or University of Phoenix, you'll have an easier time getting your borrower defense claim approved.

Closed schools can be a nightmare for students, especially when it comes to their loans. If your school closes before you can finish your education, you might be able to get a closed school discharge.

To qualify, you need to meet one of three conditions: you were unable to complete your education because your school closed, you were attending classes when your school closed, or you were on an approved leave of absence when your school closed, or if the school closed within 120 days after you withdrew.

If you don't meet these qualifications, you can still apply for loan forgiveness through the Borrower Defense to Repayment program. This program is for students whose school misled them or engaged in other misconduct.

Here are the resources you can use to learn more about closed school discharge and Borrower Defense to Repayment: