Dealing with student loans can be overwhelming and confusing. And when things get complicated, you might want a professional to answer some of your most pressing student loan questions.
Can student loans actually be discharged in bankruptcy? What are your rights as a borrower? What are your options if you are facing default?
We got the low down from student loan expert, Jay Fleischman, a consumer protection lawyer working in the fields of student loan resolution, bankruptcy, credit reporting errors, and debt collection abuse. Fleischman writes at Consumer Help Central and also hosts the Student Loan Show podcast. He’s the real deal.
We chatted about his experience with student loans, how he got started in such a specific niche, and discussed important issues regarding student loans. Read more to get your top student loan questions answered.
What is your experience with student loans?
Though I didn’t graduate from college with student loans, law school left me with $40,000 in federal student loan debt.
How did you get started as a student loan lawyer?
As a lawyer practicing in the field of consumer bankruptcy, I was frustrated with what I saw as the limited options for borrowers to obtain relief from their student loans.
I was vaguely aware that there were various federal programs, but it was only after committing myself to learning about student loan resolution that I was able to understand the options available to borrowers.
With respect to private student loan resolution, my education started as a result of a client coming to me with questions about a lawsuit for a past due loan. She’d never heard of the entity suing her, so I did some digging and learned that the world of private student loans is far more complicated than I’d ever realized.
This enabled me to help develop various cutting edge ideas and practices to help borrowers level the playing field and gain relief that might not otherwise be possible.
You help student loan borrowers get their loans discharged. How does that work?
Student loan discharge can take many forms. For a few, that may include bankruptcy. For others, administrative discharge or a long-term plan for forgiveness of federal student loans may work best. Private student loan borrowers may have significant opportunities to settle their debts.
For example, private student loans aren’t bought and sold in the same ways as are credit cards. There’s no, “pennies on the dollar,” secondary market.
Rather, private student loans are securitized in the exact same way as mortgages, bundled with thousands of other loans and sold to investors. Those transactions are not only complex, but also rife with legal errors.
Those errors result in loans not being transferred properly, accounting issues, and more. The end result is that many private student loan borrowers may be able to settle their obligations for far less than they originally expected — though not in the same way as for credit card debts.
What are the biggest issues you see student loan borrowers facing and how can they combat those issues?
Student loan borrowers have two issues: the lack of information about their obligations when they sign on the dotted line, and the deliberate misinformation spread by scammers.
Colleges and universities bear a responsibility to educate their students, but so do parents and administrators at the high school level. Most high school students have no understanding of how debt works or what their obligations will look like after graduation.
They’ve got no context for deciding whether it’s a good idea to take out $50,000 in student loans for a degree that may or may not provide a positive return on their educational investment.
The government puts out information about student loans, but it’s difficult to understand and overwhelming.
We’ve got nine repayment options for federal student loans, including the new REPAYE program unrolling in December 2015, each with unique requirements and rules. For example, REPAYE looks like a great idea — 10 percent of your discretionary income paid to federal loans for 20 years, then a discharge of the unpaid balance — but the downsides aren’t promoted.
With no cap on payments and a mandatory inclusion of spousal income, except in very limited situations, many borrowers are going to see their payments rise under REPAYE rather than decrease.
After graduation, student loan borrowers are being pitched by companies that are hiding the truth about their options in an effort to get borrowers to spend thousands of dollars on needless services.
Lawmakers have taken actions to shut down a number of these companies, but without regulation and licensing there’s no way for borrowers to know which services are reputable.
Some of the misinformation may be coming from lawyers who haven’t taken the time to understand the interplay of student loans and bankruptcy. These lawyers aren’t intentionally misleading their clients, but have become conditioned over the years to believe that there’s no relief available for student loans in bankruptcy. If nothing else, using bankruptcy to temporarily restructure student loans may provide a benefit to struggling borrowers.
What are student loan borrowers’ rights?
Borrowers have the right to accurate information about their student loan options, as well as the right to control the manner of collection activities against them. Debt collection and credit reporting laws apply to student loan borrowers, and it’s important for them to understand the rights afforded by those laws.
What tips do you have for borrowers facing default?
Do your homework about your student loan options. Read everything you can, from every possible source. If a website offers help without also providing detailed information about how they provide that help, verify their claims with government sources or licensed attorneys.
Start your research with government sites and free resources, then move to lawyers with expertise in student loan resolution. Pay for advice and information regarding your federal student loans, but not for services — the U.S. Department of Education offers a comprehensive set of forms and instructions at no cost whatsoever.
If you do need to hire a professional for a federal student loan issue, hire a lawyer. Student loan attorneys are not only licensed and regulated by state bars, but will often charge less and provide better service than one of the fly-by-night companies out there.
If you’re looking to refinance or consolidate student loans, know the implications of your choices. Shop around and ask questions before making a decision, always remembering that your financial future is at stake. Run the numbers before it’s too late.
Finally, don’t ignore a lawsuit. You may have valid defenses, but you’ve got only a limited about of time to respond before a lender takes a judgment against you.
Thanks so much to Jay Fleischman for sharing his expertise with our community and answering our student loan questions!
Interested in refinancing student loans?Here are the top 6 lenders of 2020!
|Lender||Variable APR||Eligible Degrees|
|1.99% – 7.10%1||Undergrad & Graduate|
|1.99% – 6.65%2||Undergrad & Graduate|
|1.99% – 6.24%3||Undergrad & Graduate|
|2.39% – 6.01%||Undergrad |
|1.99% – 5.64%4||Undergrad & Graduate|
|3.18% – 6.06%5||Undergrad & Graduate|
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1 Important Disclosures for Splash Financial.
Splash Financial Disclosures
Splash Financial loans are available through arrangements with lending partners. Your loan application will be submitted to the lending partner and be evaluated at their sole discretion. For loans where a credit union is the lender, or a purchaser of the loan, in order to refinance your loans, you will need to become a credit union member.
The Splash Student Loan Refinance Program is not offered or endorsed by any college or university. Neither Splash Financial nor the lending partner are affiliated with or endorse any college or university listed on this website.
You should review the benefits of your federal student loan; it may offer specific benefits that a private refinance/consolidation loan may not offer. If you work in the public sector, are in the military or taking advantage of a federal department of relief program, such as income based repayment or public service forgiveness, you may not want to refinance, as these benefits do not transfer to private refinance/consolidation loans.
Splash Financial and our lending partners reserve the right to modify or discontinue products and benefits at any time without notice. To qualify, a borrower must be a U.S. citizen and meet our lending partner’s underwriting requirements. Lowest rates are reserved for the highest qualified borrowers. This information is current as of May 1, 2020.
Fixed APR: Annual Percentage Rate [APR] is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. Fixed Rate options range from 2.88% (without autopay) to 7.27% (without autopay) and will vary based on application terms, level of degree and presence of a co-signer. Rates are subject to change without notice. Fixed rate options without an autopay discount consist of a range from 2.88% per year to 6.21% per year for a 5-year term, 3.40% per year to 6.25% per year for a 7-year term, 3.45% to 5.08% for a 8-year term, 3.89% per year to 6.65% per year for a 10-year term, 4.18% per year to 5.11% per year for a 12-year term, 4.20% per year to 7.05% per year for a 15-year term, or 4.51% per year to 7.27% per year for a 20-year term, with no origination fees. The fixed interest rate will apply until the loan is paid in full (whether before or after default, and whether before or after the scheduled maturity date of the loan).
Variable APR: Annual Percentage Rate [APR] is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. Variable rate options range from 1.99% (with autopay) to 7.10% (without autopay) and will vary based on application terms, level of degree and presence of a co-signer. Our lowest rate option is shown with a 0.25% autopay discount. Our highest rate option does not include an autopay discount. The variable rates are based on the Variable rate index, is based on the one-month London Interbank Offered Rate (“LIBOR”) published in The Wall Street Journal on the twenty-fifth day, or the next business day, of the preceding calendar month. As of April 27, 2020, the one-month LIBOR rate is 0.43763%. The interest rate on a variable rate loan is comprised of an index and margin added together. The margin is a fixed amount (disclosed at the time of your loan application) added each month to the index to determine the next month’s variable rate. Variable rate options without an autopay discount consist of a range from 2.01% per year to 6.30% per year for a 5-year term, 4.00% per year to 6.35% per year for a 7-year term, 2.09% per year to 3.92% per year for a 8-year term, 4.25% per year to 6.40% per year for a 10-year term, 2.67% per year to 4.56% per year for a 12-year term, 3.44% per year to 6.65% per year for a 15-year term, 4.75% per year to 6.93% per year for a 20-year term, or 5.14% per year to 7.10% for a 25-year term, with no origination fees. APR is subject to increase after consummation. Variable interest rates will fluctuate over the term of the borrower’s loan with changes in the LIBOR rate, and will vary based on applicable terms, level of degree earned and presence of a co-signer. The maximum variable rate may be between 9.00% and 16.00%, depending on loan term. The floor rate may be between 0.54% and 4.21%, depending on loan term. These rates are subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.
2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
All credit products are subject to credit approval.
Laurel Road began originating student loans in 2013 and has since helped thousands of professionals with undergraduate and postgraduate degrees consolidate and refinance more than $4 billion in federal and private school loans. Laurel Road also offers a suite of online graduate school loan products and personal loans that help simplify lending through customized technology and personalized service. In April 2019, Laurel Road was acquired by KeyBank, one of the nation’s largest bank-based financial services companies. Laurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. All loans are provided by KeyBank National Association, a nationally chartered bank. Member FDIC. For more information, visit www.laurelroad.com.
As used throughout these Terms & Conditions, the term “Lender” refers to KeyBank National Association and its affiliates, agents, guaranty insurers, investors, assigns, and successors in interest.
Assumptions: Repayment examples above assume a loan amount of $10,000 with repayment beginning immediately following disbursement. Repayment examples do not include the 0.25% AutoPay Discount.
Annual Percentage Rate (“APR”): This term represents the actual cost of financing to the borrower over the life of the loan expressed as a yearly rate.
Interest Rate: A simple annual rate that is applied to an unpaid balance.
Variable Rates: The current index for variable rate loans is derived from the one-month London Interbank Offered Rate (“LIBOR”) and changes in the LIBOR index may cause your monthly payment to increase. Borrowers who take out a term of 5, 7, or 10 years will have a maximum interest rate of 9%, those who take out a 15 or 20-year variable loan will have a maximum interest rate of 10%.
KEYBANK NATIONAL ASSOCIATION RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.
This information is current as of June 23, 2020. Information and rates are subject to change without notice.
3 Important Disclosures for SoFi.
4 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 2.98% APR (with Auto Pay) to 5.79% APR (with Auto Pay). Variable rate loan rates range from 1.99% APR (with Auto Pay) to 5.64% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of July 31, 2020, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 7/31/2020. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at [email protected], or call 888-601-2801 for more information on our student loan refinance product.
© 2020 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 0.18% effective July 10, 2020.