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Half Of Outstanding Student Debt Is Held By This One Group

The National Interest 31 December, 1969 - 06:00pm

Help, President Biden: Could The Student Loan Payment Deadline Be Extended?

The National Interest 31 December, 1969 - 06:00pm

1 Big Mortgage Risk to Avoid in This Crazy Market

Motley Fool 20 July, 2021 - 05:32pm

Check out our top picks of the best online savings accounts for July 2021.

Explore our picks of the best brokerage accounts for beginners for July 2021.

Before you apply for a personal loan, here's what you need to know.

by Christy Bieber | July 20, 2021

The real estate market today is definitely not the most favorable one for borrowers. There's a serious shortage of homes available for sale, and housing prices have repeatedly hit new recent highs in most parts of the country. Many properties are also selling very quickly.

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Unfortunately, with housing costs so high and homes so hard to come by, many borrowers may end up stretching their budgets in order to be able to get into a home.

Lenders will approve borrowers for a loan based on their debt-to-income ratio (DTI). This looks at total monthly debt payments relative to monthly income. Typically, mortgage lenders allow borrowers to go as high as a 38% debt-to-income ratio (including the mortgage), but some permit them to take on much more debt. In fact, for certain kinds of mortgage loans, it's possible that a borrower could get approved with a DTI as high as 50%.

But an approval for a large loan doesn't mean that it's actually affordable for you during the entire payoff time -- especially given your financial goals and future plans. If you opt to take out the largest allowable mortgage so you can make a competitive offer in today's seller's market, you could end up really regretting it if it turns out making the loan payments isn't comfortable for you.

Set your maximum mortgage loan limit yourself based on the amount you are really sure you are comfortable paying each month. And when you decide how large a mortgage payment you are willing to make, consider all of your other expenses as well as financial goals, such as early retirement or paying for college.

Once you have set a maximum monthly mortgage payment for yourself, you can work backwards from there and see what size loan will come within your budget. A mortgage calculator can help you figure out your total monthly payment. That should shape your home buying choices.

For example, if you decide you simply aren't comfortable with paying more than around $1,000 per month for your mortgage loan, then the maximum amount you should be borrowing is around $250,000 (assuming you qualify for a 30-year loan at a rate somewhere around 3.125%).

After you've figured out the mortgage loan amount you're comfortable with, you can calculate how much money you have for a down payment. Then start shopping for homes you can afford with the money you're putting down and the maximum loan amount you're willing to borrow. Stick only to searching for homes that are within that price limit so you aren't tempted to up your budget just to get into a property during a seller's market.

Chances are, interest rates won't stay put at multi-decade lows for much longer. That's why taking action today is crucial, whether you're wanting to refinance and cut your mortgage payment or you're ready to pull the trigger on a new home purchase. 

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If Biden can’t forgive student loan debt, his infrastructure bills mean nothing | Carli Pierson

The Independent 20 July, 2021 - 04:08pm

According to Forbes, 45 million borrowers in the US owe a whopping $1.6 trillion in student loan debt, which is now the second-highest consumer debt category after mortgage debt. Most Republicans appear generally opposed to ludicrous ideas like universal pre-K or expanding dental and vision in Medicare, both of which are in the $3.5 trillion proposed budget deal. And I get it — if babies can’t make enough money to pay for their own toys and childcare then they shouldn’t expect the government to shore up their extravagant lifestyles! As for healthcare, honestly, real Americans don’t need teeth to eat soup!

As reasonable as those arguments may be, I believe that the benefits of student loan forgiveness have a uniquely pro-capitalist, bipartisan appeal that Republicans in Congress are overlooking. If we want our free-market, capitalist society to thrive then we have to lighten the load on generations of Americans who can’t move forward financially because of the massive student debt dragging behind them. When you owe tens or even hundreds of thousands of dollars in student loan debt, you can’t buy a house, save for retirement, get married, or go on shopping sprees — all fundamental pillars of the spending (and saving) this Yankee economy is based on.

When I went to law school in 2009, I never thought that I wouldn’t be able to repay my student loans. No one puts themselves through three grueling years of 16-hour days spent enduring the Socratic method, outlining and reading hundreds of pages of caselaw a day, and undergoing a Bar exam while simultaneously believing that they will never be able to make enough money in order to pay it all back. That is nobody’s plan. Today, however, over ten years later, I am confronted with the terrifying and depressing realization that I will never be able to pay back all that I owe (and I didn’t even have to borrow for undergraduate school).

The American system of oppressive fees for higher education wasn’t always this way. When my mom went to college back in the late 60’s and 70’s, student loan debt was manageable; even though she came from a family with very limited resources, she was able to work and put herself through college and my dad through law school, buy a home, a car, get married, and save for retirement. Manageable student loans are now a thing of the past.

If Republican lawmakers want a return to the good ‘ol days when people could spend to their heart’s content and pay it all back, and if Dems want to provide relief to Americans unable to get ahead despite how hard they work, then we need to forgive student loan debt as part of these two infrastructure plans. Without it, it’s just not enough.

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Student Loans Bill Of Rights May Be Coming To Your State

Forbes 20 July, 2021 - 02:05pm

A student loan borrower bill of rights may be coming to your state.

Here’s what you need to know — and what it means for your student loans.

While student loan borrowers await the prospect of wide-scale student loan cancellation, there’s a growing trend that could help provide student loan relief. It’s called a student loan borrower bill of rights. States including California, Colorado, Connecticut, District of Columbia, Illinois, Maine, Massachusetts, Maryland, New Jersey, New York, Rhode Island, Virginia and Washington have implemented policies to help student loan borrowers. This may be especially important to student loan borrowers, since federal student loan payments are scheduled to resume starting October 1. Here’s how they work and what they mean for your student loans:

A student loan borrower bill of rights helps protect student loan borrowers from deceptive or fraudulent practices and helps ensure that student loan borrowers get a fair shake when dealing with student loan repayment. In 2020, Governor Gavin Newsom signed legislation to establish a student loan borrower bill of rights. This came one year after New York passed the Student Loan Servicing Act. Here’s an example of the California student loan borrower bill of rights and the New York student loan borrower bill of rights:

In California, student loan borrowers have the following rights, among others:

In New York, student loan borrowers have the following rights, among others:

If you need to file a complaint regarding your student loans or student loan servicer, make sure it’s in writing. You can contact any one or more of the following:

Expect more states to implement a student loan borrower bill of rights. What does this mean for your student loans. A student loan borrower bill of rights means you will have more protections as a student loan borrower and can expect student loan servicers to be held accountable if they engage in any unfair or deceptive practices. The goal is to make the student loan borrowing and student loan payment process simpler and smoother for borrowers. Many student loan borrowers and advocates also have called for a federal student loan borrower bill of rights. Sen. Elizabeth Warren (D-MA), Sen. Dick Durbin (D-IL) and others in Congress have proposed legislation to establish a student loan borrower bill of rights. For example, The Student Loan Borrower Bill of Rights Act of 2019 would have required student loan servicers to implement uniform servicing and disclosure standards across private and federal student loans by amending the Truth In Lending Act. That legislation, if passed, would have limited late fees on student loans, improved protections on private loans, improved prompt resolution of student loan servicing errors, and improved disclosures when your student loan is sold, among other benefits.

Student loan payments will resume starting October 1, unless President Joe Biden postpones student loan payments and extends the federal student loan payment moratorium. By pausing student loan payments for eight months, Biden has provided more time for student loan servicers to train their employees and implement improved standards for performance and customer service. That said, Warren says student loan borrowers are not prepared to start student loan payments again. How will this impact student loan borrowers? According to a recent survey, 90% of student loan borrowers say they’re not ready to resume student loan payments. The U.S. Department of Education wants to ensure a smooth transition to student loan payments, which means that student loan servicers must be prepared if student loan payments restart October 1. For now, in addition to the U.S. Department of Education, the states also have been leading the charge to oversee student loan servicers and offer additional protection for student loan borrowers. Biden has championed more protections for student loan borrowers and is committed to strengthening the CFPB. The U.S. Department of Education, with the hiring of Richard Cordray, will enhance oversight of student loan servicers to ensure that student loan borrowers get a fair shake when it comes to their student loans. State attorneys general also will continue to regulate student loan servicers. For example, Massachusetts Attorney General Maura Healey has filed several lawsuits against student loan servicers such as Navient and FedLoan Servicing (who announced it would end its contract to service federal student loans) to hold them accountable for unfair practices toward student loan borrowers.

If you have student loans, make sure you have a solid plan for student loan repayment. Here are some potential options to consider:

A Second Student Loan Servicer Quits, Adding To Potential Chaos For Borrowers

Forbes 20 July, 2021 - 01:16pm

Less than two weeks after a major student loan servicing shakeup, yet another U.S. Department of Education student loan servicer is calling it quits.

Granite State Management and Resources, which handles over a million student loan borrower accounts, announced that it will suspend its student loan servicing operations for the Department of Education by the end of the year.

“Yesterday, officials from Granite State Management and Resources notified leadership at the U.S. Department of Education office of Federal Student Aid that Granite State will leave the federal student loan servicing program by Dec. 31, 2021,” said Federal Student Aid Chief Operating Officer Richard Cordray in a statement. “FSA and Granite State will work together to ensure that student loan borrowers will transition smoothly to a different loan servicer.”

Granite State’s announcement comes on the heels of a similar decision by the Pennsylvania Higher Education Assistance Authority (PHEAA), whose federal Direct student loan servicing wing operates as FedLoan Servicing. PHEAA announced earlier this month that it would not be renewing its contract with the U.S. Department of Education. FedLoan Servicing handles over 8.5 million individual borrower accounts, and also is the primary servicer tasked with administering the Public Service Loan Forgiveness and TEACH Grant programs. FedLoan Servicing’s contract also ends in December.

The abrupt departure of two major student loan servicers from the Department of Education’s massive federal student loan system will likely be disruptive to millions of borrowers. The Biden administration will now have to transfer 10 million or more student loan borrower accounts to other loan servicers. Such servicing transfers by Department of Education contractors have historically been chaotic, with widespread problems including lost records and missed payments.

Complicating matters further is that the servicing transfers would have to occur in the midst of the expiration of the current moratorium on federal student loan payments. The CARES Act, legislation enacted by Congress last year in response to the pandemic and recession, temporarily suspended all payments and froze all interest on government-held federal student loans. The student loan payment pause was originally set to last six months, but was extended several times. The current extension of the moratorium ordered by President Biden will expire on September 30, 2021.

Advocates for student loan borrowers have been urging the Biden administration to extend the student loan payment moratorium into 2022, arguing that borrowers and student loan servicers are not prepared to handle the transition to regular repayment.

“Now more than ever, student loan borrowers need Joe Biden to deliver promised debt relief,” said Student Borrower Protection Center Executive Director Seth Frotman in a statement earlier this month. “Student loan borrowers... also need the White House to extend the pause on student loan payments while Secretary Cardona and the student loan industry come up with a plan to fix the broken student loan system.” 

The Biden administration has suggested that the student loan payment pause could be further extended, depending on the state of the pandemic and the economy.

Student loan borrowers who are concerned about potential servicing disruptions should take steps now to protect themselves by downloading and retaining important documentation including payment histories and correspondence, reviewing their contact information, and monitoring their credit reports.

Student loan payments are starting again soon. Most borrowers say they aren't ready

CNBC 20 July, 2021 - 10:00am

More than two-thirds of federal student loan borrowers say they're not ready to resume their monthly payments.

That's the finding from a survey conducted for The Pew Charitable Trusts, which comes as the U.S. Department of Education's payment pause and interest waiver for borrowers is set to expire at the end of September.

Around 60% of borrowers who are taking advantage of the relief said they were using the extra cash for essential expenses, including rent and food. The average student loan bill is around $400 a month.

"This shows that while the economy is recovering, not all households are, so the student loan pause continues to be a significant lifeline for borrowers," said Regan Fitzgerald, manager of The Pew Charitable Trusts' project on student borrower success.

There are signs that the White House is considering an extension.

U.S. Education Secretary Miguel Cardona told the Senate Appropriations Committee in June that he was involved in conversations over whether October was the best time to resume payments. In May, at an Education Writers Association conference, Cardona said extending the payment pause was on the table.

At the same time, a recent change in student loan servicing could work in borrowers' favor.

The Pennsylvania Higher Education Assistance Agency — which oversees loans of 8.5 million student borrowers — announced this month it would not renew its contract with the federal government when it ends in December. As a result, those borrowers will need to be matched with a new lender.

Democratic legislators and student borrower advocates are pushing for an extension.

Sen. Elizabeth Warren, D-Mass., and Senate Majority Leader Chuck Schumer, D-N.Y., sent a letter in June to President Joe Biden, urging him to keep the payment pause in effect until March 2022. That would mean most borrowers wouldn't have made a payment on their student loans in two years.

More than 120 organizations, including the American Civil Liberties Union, the National Consumer Law Center and the Consumer Federation of America, also recently wrote to the president, asking him to extend the payment pause until student debt has been forgiven.

Borrowers were struggling before Covid, with more than 1 in 4 in delinquency or default. After more than a year of record-high unemployment levels, that pain has only worsened. The Congressional Budget Office recently predicted that the jobless rates for younger workers will be slower to improve than the overall rate.

"Best guess is that the payment pause and interest waiver will be extended if the unemployment rates for college graduates have not yet normalized as of Sept. 30, 2021," Kantrowitz said.

Still, Kantrowitz said borrowers may be underestimating how ready they are to resume payments after such a long break from them.

"What people say and what people do are often two entirely different things," he said.

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Parents in debt for kids’ college can get forgiveness

syracuse.com 20 July, 2021 - 08:06am

College students take on loans as an investment: Presumably, they’ll graduate and reap the benefits — income that helps them repay that debt and then some.

But parents borrow for their children without the promise of higher earnings. And legally, they’re the ones on the hook.

Federal parent PLUS loans are easy to get: Colleges often list them alongside grants and undergraduate loans on financial aid award letters. They lack traditional underwriting requirements for credit history and income. There’s also no limit on how much a parent can borrow in total.

These factors make it easy for parents to borrow more than they can handle.

“I feel like parents feel more pressure to take on unaffordable debt when it comes to college than they would for anything else,” says Betsy Mayotte, president and founder of The Institute of Student Loan Advisors.

Parent PLUS loans also offer fewer options to make payments manageable, and navigating them is more complicated.

“It’s not insurmountable to access all of these things, but when you have all the things together it’s a lot of hoops that parents have to jump through in order to get relief,” says Rachel Fishman, deputy director for research with the Education Policy program at New America, a nonpartisan think tank.

Here’s why parent PLUS loans can mount quickly, and how struggling parent borrowers can reduce payments and pursue forgiveness.

Parent PLUS loans were initially intended to help parents from middle- and upper-income backgrounds who didn’t have cash on hand, but had assets, says Kristin Blagg, a senior research associate in the Center on Education Data and Policy at the Urban Institute, a nonprofit research organization. But over time, the target borrower for these loans shifted toward middle- and lower-income families.

“The logic of ‘OK, you have assets you can lean on to repay this debt’ kind of falls apart for lower-income families,” Blagg says.

Parent PLUS loans are also the most expensive federal loan type: Currently they carry an interest rate of 6.28% for the 2021-22 school year, compared with 3.73% for undergraduate loans. And they carry higher origination fees — currently 4.228%. Parents who meet traditional income and credit standards can get private student loans at much lower rates with zero origination fee — but parents with low income or spotty credit histories cannot.

Over the last seven years, parent PLUS loan debt has grown from $62.2 billion to $103.6 billion — a 67% increase, compared with a 39% increase in loans for undergraduate students.

While there’s little information about default rates among parent borrowers, both Mayotte and Fishman say there’s enough anecdotal evidence that shows some borrowers are struggling to repay these loans.

Lawmakers, student debtors and activists have put sustained pressure on Washington for loan cancellation of as much as $50,000, but there is no specific proposal making its way through Congress and no guarantee that PLUS loans would be included.

Here are the options available to parents now:

Pursue income-contingent repayment forgiveness. Income-driven repayment is a safety net for all federal student loan borrowers, but parent PLUS holders can access only the most costly of the four plans: income-contingent repayment, or ICR. This caps payments at 20% of your discretionary income and lasts 25 years.

ICR is especially useful for older parents who, once they retire, can expect to have less income than they did when they took out the debt. After 25 years of payments, parent borrowers will have the remainder of their debt forgiven.

Qualify for Public Service Loan Forgiveness. Public Service Loan Forgiveness provides the opportunity for forgiveness after 120 payments while the parent is working for an eligible nonprofit or government employer.

However, this cancellation is difficult to achieve: Federal data analysis shows only 1.16% of all applications have been approved as of April 29, 2021. It is unclear how many of those applications or approvals are PLUS borrowers.

Parent PLUS borrowers must first consolidate their loans into a direct consolidation loan and enroll in income-contingent repayment in order to make qualifying payments.

Utilize closed school and borrower defense. When schools close suddenly or engage in deceptive practices, student loan borrowers, including parents, aren’t necessarily on the hook to repay their debt.

Under closed school discharge rules, if school closes while a student is still attending, all or some of the parent PLUS loans used to pay for the program would be discharged under closed school discharge, according to the Department of Education.

If a student loan borrower is misled by their school or the institution violated state laws, parent loans can be discharged through a forgiveness program called borrower defense to repayment. Under borrower defense guidelines, parent PLUS loans would also be discharged if a student’s claim is approved.

Qualify for disability discharge. Parent loan borrowers who become disabled could qualify for total and permanent disability discharge. Eligible borrowers must have a physical or mental impairment that prevents them from working.

The Social Security Administration or a physician must verify that the physical or mental impairment meets certain conditions.

Refinance privately in your child’s name. The only other way to get rid of your debt is to refinance in your child’s name with a private company. By doing this, your child would become legally responsible for repaying the debt you originally took out.

Only a few private lenders do this and, if you do it, the loan will no longer be eligible for income-contingent repayment or potential forgiveness available through the federal government. Your child will need to have strong credit, a history of making loan payments on time and income to afford payments.

Anna Helhoski writes for NerdWallet. Email: anna@nerdwallet.com. Twitter: @AnnaHelhoski

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Another student-loan company is shutting down its services, bringing total number of borrowers in limbo to nearly 10 million

Business Insider 20 July, 2021 - 12:00am

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Granite State Management and Resources (GSMR), a nonprofit student-loan company that holds 1.3 million borrower accounts, notified the Education Department that it would not seek renewal of its federal contract to service student loans after December 31, Politico first reported. As the department is planning to lift the pause on student-loan payments in October, those borrowers will have to be transitioned to a new servicer, on top of the 8.5 million borrowers who were previously with PHEAA.

"FSA (Federal Student Aid) and Granite State will work together to ensure that student loan borrowers will transition smoothly to a different loan servicer," Richard Cordray, the director of FSA, which is part of the Education Department, said in a statement obtained by Insider. "Our wind-down plan will include early and frequent communications and clear guidance about what borrowers should expect."

Cordray added that FSA would provide strong oversight over services to ensure borrowers are "supported and not harmed during this transition."

GSMR could not immediately be reached for comment.

Over the past decade, student-loan servicers have been under close scrutiny by some lawmakers on Capitol Hill who want to ensure borrowers are protected. For example, after PHEAA's announcement two weeks ago, Sen. Elizabeth Warren of Massachusetts said borrowers could "breathe a sigh of relief" knowing their loans would no longer be managed by "an organization that has robbed untold numbers of public servants of debt relief."

"The changes in student loan servicing present a golden opportunity to fix the system so that it serves borrowers rather than big corporations — that includes building better accountability into future servicing contracts with the Education Department," Warren told Insider on a statement. "I'm also pushing for strong oversight to ensure that borrowers are protected during this transition."

A PHEAA spokesperson said in a statement at the time that since the company accepted the terms of its federal servicing contract, the loan programs had grown "increasingly complex and challenging while the cost to service those programs increased dramatically."

And GSMR fell under scrutiny as well. Since 2019, the Consumer Financial Protection Bureau — an agency that Warren spearheaded to protect consumers — has received 56 complaints from borrowers about the company, with the main complaints surrounding inaccurate credit reporting, poor communication, and attempts to collect debt not owed.

Insider previously reported that communication from servicers was a big issue with borrowers who could have paid off their debt but couldn't seek help from the company that was charging them for their loans. 

The Education Department has not yet announced which companies will take over GSMR's borrower accounts, and this development will likely serve as support for Democrats' calls to extend the pause on student-loan payments to allow more time to deal with these administrative difficulties.

"Nobody's ready for student loan payments to resume," Warren wrote on Twitter. "Not borrowers. Not the student loan companies. And certainly not our economy. We must extend the pause on payments and #CancelStudentDebt."

Current Student Loans News For The Week Of July 19, 2021 | Bankrate

Bankrate.com 19 July, 2021 - 03:46pm

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Last week, a group of Democratic senators sent a letter to President Biden requesting that the break on federal student loan payments be extended until at least March 2022. Additionally, South Carolina State University forgave over $9 million in institutional student loan debt for qualifying students. Here’s what to know about this week’s student loan news.

On July 13, Democratic Sens. Elizabeth Warren and Edward J. Markey sent a letter to President Biden urging him to extend the current payment and interest pause on federal student loans to at least March 31, 2022. This push comes after an inquiry into federal student loan servicers’ plans for navigating the current end of the forbearance period on Sept. 30.

“The resumption of payments is presently scheduled to begin on Oct. 1, 2021, but the information we received in our inquiry strongly supports an extension of the pause on student loan payments and interest,” the letter reads. “The responses to our inquiry indicate that neither student loan borrowers nor student loan servicers are prepared for payments to resume.”

The letter cites multiple hurdles for restarting repayment on Oct. 1. Not only have borrowers been out of contact with their servicers during the pandemic payment pause, but servicers themselves will require more staffing to support such a large transition. FedLoan Servicing also recently announced that it will not be renewing its contract with the U.S. Department of Education, and transitioning all of FedLoan’s existing loans to other servicers will add additional strain.

The administration has yet to make an announcement about extending the forbearance period, and as of right now, it’s set to expire on Sept. 30, 2021. Borrowers should prepare to start making the regularly scheduled payments or look into alternative or income-driven repayment options if needed.

If there is an extension, it’s possible that borrowers could see another few months of relief. Regardless of the timing, borrowers will hear from their servicers before payments resume.

South Carolina State University announced on July 17 that almost $10 million in institutional student loan debt will be forgiven for students financially impacted by the COVID-19 pandemic. Alexander Conyers, in his first executive decision as the university’s acting president, said in his statement: “No student should have to sit home because they can’t afford to pay their past due debt after having experienced the financial devastation caused by a global pandemic.”

The university is using COVID-19 relief funds granted to it by the federal government through the CARES Act and the American Rescue Plan to provide forgiveness for more than 2,500 students. Most of these students were previously registered but could not continue their education due to past-due balances. The forgiven debt is loans taken out through the university, not through the federal government or private lenders.

South Carolina State University is one of many colleges that have used CARES Act and American Rescue Plan funds to help clear the institutional debt of their students. A portion of pandemic funding for universities was intended to help struggling students, which means that more students could see financial relief in the coming months.

Whether you’re new to student loans or well into repayment, it’s wise to stay informed about how your student loan rates could change. As 2021 continues, more opportunities for cheaper loans or loan forgiveness could open up; keep an eye on the Bankrate student loans news hub for the latest trends.

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