If you’re waiting for student loan forgiveness because your for-profit college closed, you’re about to get a rude awakening.
Department of Education (DoED) Secretary Betsy DeVos is working on a new plan to forgive only part of your student loan debt. What’s more, your current earnings could determine whether or not you qualify for student loan forgiveness.
Although nothing has been set in stone yet, this plan could significantly impact affected borrowers. Here’s what you need to know.
Betsy DeVos’ plan could hurt students defrauded by for-profit colleges
During the Obama administration, the DoED forgave $550 million in student loan debt for students defrauded by for-profit schools under the “borrower defense to repayment” rule — “borrower defense” for short. Students who attended for-profit schools that ended up closing were able to use this rule to have their debt forgiven.
Now, according to the Washington Post, DeVos is proposing changes to the borrower defense rule. “[Betsy DeVos] is working on a plan that could grant such students just partial relief, according to department officials.”
Because of DeVos’ proposed changes, the DoED announced it intends to delay approval of student loan forgiveness for those who have already applied.
According to the DoED’s Federal Register notice, the delay, which is set to last until July 1, 2019, is meant to “ensure that there is adequate time to conduct negotiated rulemaking and, as necessary, develop revised regulations.”
Why is Betsy DeVos delaying student loan forgiveness?
Although students can still apply for the borrower defense rule, none of the existing 87,000 claims have been approved by DeVos since she took office. This includes 10,000 claims already recommended for approval.
So why the delay? Anonymous sources within the DoED spoke to the Washington Post and explained why department officials have yet to address the pending claims: “They say leadership in the Office of Federal Student Aid and the Office of the General Counsel would prefer to grant partial relief based on the debt-to-earnings data collected from vocational programs.”
In other words, according to the Associated Press, they want to “look at the average earnings of students in similar programs and schools to determine how much debt to wipe away.”
This gives borrowers little information as to what this could mean for the status of their applications. Do higher earnings mean less forgiveness for them? Is it fair to compare the average employment opportunities for students of closed for-profit colleges as compared to “similar programs and schools” that are still open?
For now, only time will tell.
What alumni of closed for-profit colleges should do now
Should DeVos make the above changes to the borrower defense rule, many applicants might be on the hook for a portion of their loans.
If you’re counting on complete student loan forgiveness, this could put you in a financial bind. It’s even worse if you’re struggling to find employment due to the school you attended.
However, these are all just potential changes — nothing is set in stone. You should still apply for borrower defense if you qualify. You could even talk to your servicer about closed school discharge.
But whatever you do, don’t stop paying your loans.
Student loan default can damage your credit score and isn’t worth the break you’d get on payments while you wait to see if you can qualify for student loan forgiveness. If you’re struggling to make your payments, you can get help instead through income-driven repayment plans.
These plans cap your payment amount to a percentage of your income. This can help you stay above water while waiting to see what happens next with DeVos’ plans. What’s more, these plans can eventually qualify you for student loan forgiveness. Although it’s not the same as getting a refund on your loans from a for-profit school that defrauded you, it at least keeps your credit and your finances in good standing.
Finally, if you were in the middle of a program when your school closed, consider finishing your program elsewhere. After all, doing so can improve your chances of employment opportunities — and going to college can also boost your lifetime earnings.
Interested in refinancing student loans?Here are the top 6 lenders of 2018!
|Lender||Variable APR||Eligible Degrees|
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1 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 3.89% APR (with Auto Pay) to 6.97% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 6.30% 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 Month/Day/Year, 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 08/21/18. 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@example.com, or call 888-601-2801 for more information on ourstudent loan refinance product.
© 2018 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.
2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
APR stands for “Annual Percentage Rate.” Rates listed include a 0.25% EFT discount, for automatic payments made from a checking or savings account. Interest rates as of 11/8/2018. Rates subject to change.
Variable rate options consist of a range from 3.27% per year to 6.09% per year for a 5-year term, 4.64% per year to 6.14% per year for a 7-year term, 4.69% per year to 6.19% per year for a 10-year term, 4.94% per year to 6.44% per year for a 15-year term, or 5.19% per year to 6.69% per year for a 20-year term, with no origination fees. APR is subject to increase after consummation. The variable interest rate will change on the first day of every month (“Change Date”) if the Current Index changes. The variable interest rates are based on a Current Index, which is the 1-month London Interbank Offered Rate (LIBOR) (currency in US dollars), as published on The Wall Street Journal’s website. The variable interest rates and Annual Percentage Rate (APR) will increase or decrease when the 1-month LIBOR index changes. The variable interest rates are calculated by adding a margin ranging from 0.98% to 3.80% for the 5-year term loan, 2.35% to 3.85% for the 7-year term loan, 2.40% to 3.90% for the 10-year term loan, 2.65% to 4.15% for the 15-year term loan, and 2.90% to 4.40% for the 20-year term loan, respectively, to the 1-month LIBOR index published on the 25th day of each month immediately preceding each “Change Date,” as defined above, rounded to two decimal places, with no origination fees. If the 25th day of the month is not a business day or is a US federal holiday, the reference date will be the most recent date preceding the 25th day of the month that is a business day. The monthly payment for a sample $10,000 loan at a range of 3.27% per year to 6.09% per year for a 5-year term would be from $180.89 to $193.75. The monthly payment for a sample $10,000 loan at a range of 4.64% per year to 6.14% per year for a 7-year term would be from $139.65 to $146.76. The monthly payment for a sample $10,000 loan at a range of 4.69% per year to 6.19% per year for a 10-year term would be from $104.56 to $111.98. The monthly payment for a sample $10,000 loan at a range of 4.94% per year to 6.44% per year for a 15-year term would be from $78.77 to $86.78. The monthly payment for a sample $10,000 loan at a range of 5.19% per year to 6.69% per year for a 20-year term would be from $67.05 to $75.68.
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
3 Important Disclosures for SoFi.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
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 2.28% effective October 10, 2018.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.47% – 6.99%3||Undergrad & Graduate|
|2.47% – 6.30%1||Undergrad & Graduate|
|2.51% – 8.09%4||Undergrad & Graduate|
|3.02% – 6.44%2||Undergrad & Graduate|
|2.69% – 7.21%5||Undergrad & Graduate|
|2.79% – 8.39%6||Undergrad & Graduate|