If you made payments on student loans during the pandemic, you may be eligible for a refund

It’s the announcement borrowers have been waiting on since the news about federal student loan cancellation first broke – millions with federal student loans will now receive automatic refunds on loan payments made during the pandemic. The U.S. Department of Education recently shared this latest development in federal relief last week, effectively answering the question of whether or not payments made during the student loan pause would be included in President Biden’s plan to cancel student debt. 

With over 9 million people having made at least one payment on their federal student loans during the pandemic, reimbursements will make sure borrowers receive the exact amount of cancellation they’re eligible for. CNBC detailed eligibility requirements in a recent report:

“Payments made since March 2020 on federal student loans eligible for the pause should now be refundable, higher education expert Mark Kantrowitz told CNBC. Commercially held Federal Family Education Loans (FFEL), however, which were not eligible for the pause, won’t be eligible for the refund.

Per the department’s website, those who are eligible for debt cancellation will automatically receive a refund if:

• You successfully apply for and receive debt relief under the Administration’s debt relief plan, AND

• Your voluntary payments during the payment pause brought your balance below the maximum debt relief amount you’re eligible to receive but did not pay off your loan in full.”

For example: If you’re a borrower eligible for $10,000 in relief, had a balance of $10,500 prior to March 13, 2020 and paid $1,000 toward your loans during the pause, bringing your balance to $9,500, the department will discharge your $9,500 balance, and you’ll receive a $500 refund.”

Read the full article here.

Officials to buckle down on unlawful debt collection in nursing homes

Nursing homes and debt collectors are taking advantage of laxed regulation on laws prohibiting the harassment of residents’ friends and family for care facility costs according to a recent report from the Consumer Financial Protection Bureau. More and more individuals with loved ones residing in nursing homes have declared bankruptcy, had their wages unlawfully garnished, and even their homes repossessed after signing “admission agreements” that designate them liable for nursing home payments. 

Desperate pleas for more proactive regulation of federal protections has caused the Department of Health and Human Services’ Centers for Medicare and Medicaid Services to step in and send nursing homes and debt collection agencies warnings to cease unlawful practices. ABC News recently reported on how these practices are affecting residents and their families along with what steps the government has taken to prevent predatory debt collection. 

“Rohit Chopra, director of the consumer bureau, held a virtual public hearing with advocates, nursing home administrators and people affected by what they say are unlawful debt collection practices.

Anna Anderson, a consumer protection lawyer in New York, said she has seen hundreds of lawsuits filed against friends and family of care home residents that seek reimbursement for facilities' costs.

‘It’s not only routine’ she said. ‘It’s a deeply troubling practice.’

She said it ‘puts families in a position of having to choose between protecting their family members at nursing facilities or putting themselves in a position of financial ruin.’

…

The Nursing Home Reform Act prevents facilities “from requiring a person other than the resident to assume personal responsibility for any cost of the resident’s care.”

But why that seems to happen so often is due in part to lax government enforcement, said Eric Carlson, a lawyer at Justice in Aging. Carlson said during the hearing that agencies in charge of oversight rarely cite and fine companies that require third parties to sign admission agreements.

David Bifulco, a Pennsylvania lawyer who represents debtors sued for hundreds of thousands of dollars, said the bureau and other agencies should educate federal and local courts about the prevalence of the problem, before a default judgment is entered.”

Read the full article here.

MAJOR UPDATE: new information about Biden’s student loan cancellation efforts and what it means for borrowers

Since the Biden Administration announced their plan to cancel a portion of federal student debt for borrowers, new details about what that plan will entail have been unveiled by the White House. 

Forbes recently reported on several major updates to Biden’s student loan cancellation rollout that you might have missed: 

By the look of things, the Department of Education has hinted that an application for student loan cancellation will be available sometime in October.

“The Department anticipates a four to six week turnaround time once an application is submitted. While officials are encouraging borrowers to submit the application by November 15 so that they can receive loan forgiveness by the time student loan payments restart in January, borrowers will have a full year to submit their application.

The Department recommends logging in to your StudentAid.gov account to ensure your contact information is up to date. You can also sign up for alerts.”

Eligible borrowers will be able to apply for $10,000 of student loan cancellation, or up to $20,000 if they are a Pell Grant recipient. To qualify, individual applicants must make less than $125,000 in yearly income or less than $250,000 jointly if they are married. 

Income guidelines are specific to the 2020-2021 financial years. 

“The Education Department has indicated that to qualify, borrowers must have earned under $125,000 in income, or $250,000 if they are married, in either 2021 or 2020. That means borrowers can use their income as reported in either of those years. The key figure is the borrower’s Adjusted Gross Income (AGI) as reported on their federal tax return.”

Almost all federal loans are eligible for cancellation. This includes undergraduate loans, graduate loans, and Parent PLUS loans. 

“Government-held loans include all federal Direct student loans, as well as some FFEL-program loans and Perkins loans held by the government. Defaulted federal student loans also qualify.

FFEL-program loans held by private, commercial lenders do not automatically qualify for student loan forgiveness under the Biden initiative. However, the Education Department confirmed that FFEL borrowers ‘can receive this relief by consolidating these loans into the Direct Loan program.’”

Read the full article here. 

Biden cancels $10K in student debt for borrowers earning less than $125K a year

Yesterday, President Biden announced a plan to cancel $10,000 of student debt for individuals earning less than $125,000 a year. The plan also includes $20,000 of debt cancellation for Pell Grant recipients.  The amount of relief the Biden Administration is offering, however, is significantly less than what some Democrats were pushing for according to a report from the New York Times.

“‘All of this means people can [finally start] to climb out from under that mountain of debt,” [President] Biden said in remarks from the White House. “To finally think about buying a home or starting a family or starting a business. And by the way, when this happens, the whole economy is better off.’

[President] Biden also announced that a pandemic-era pause on student loan payments, which has been in effect since March 2020, would expire at the end of the year. The timing for the debt relief is uncertain; the Department of Education said it would set up an application process by the end of the year.

Across the United States, 45 million people owe $1.6 trillion for federal loans taken out for college — more than they owe on car loans, credit cards or any consumer debt other than mortgages.”

This is a HUGE step toward full federal student loan cancellation, but there’s still a lot of work to be done. We’re ready to advocate for complete cancellation WITHOUT means-testing on behalf of over 46 million borrowers crippled by student debt. Biden’s plan will only make a dent in the growing economic crisis, but we’re optimistic that this is just the beginning. 

Debt cancellation is already means-tested. The richest among us can afford to pay off their debt, and debt cancellation typically benefits low and middle-income borrowers who don’t have the means to do so. While we fight for a more inclusive response from the White House, Debtless will continue to provide debt cancellation for EVERYONE regardless of their financial status. 

Read the full article here.

“High-earning” borrowers are accumulating 7-figures in student loans they can’t pay back: they deserve debt cancellation, too

The student debt crisis has grown substantially over the last decade, leaving many borrowers in devastating financial situations that are only getting worse. People in high-earning jobs are often overlooked in conversations surrounding student debt (outside of Republican lawmakers claiming they will disproportionately benefit from student debt cancellation), but the amount of debt it takes to obtain a graduate degree can leave people wondering whether or not it was worth the investment.

Business Insider recently reported that the number of Americans who owe over $1 million in federal student loans has grown significantly (from 14 people in 2013 to 101 people in 2018) according to a figure from the Department of Education.

“It's something that often gets overlooked when considering broad student-loan forgiveness. Many Republican lawmakers have slammed the idea of canceling student debt for all federal borrowers because the highest earners, like doctors and lawyers, would benefit. In an apparent attempt to counter that criticism, Biden is considering $10,000 in relief for borrowers making under $150,000 a year, The Washington Post reported — likely under the notion that an income cap would ensure relief went to those in most need.”

But high-earning borrowers are still struggling to pay off their student loans.

Many debt cancellation advocates argue that means-testing would only stall getting borrowers the relief they need. More and more Americans in high-earning jobs are accumulating debt above their pay grade. There are a number of reasons why even a high salary might not be enough to dig some people out of debt: predatory repayment plans that can draw out payments over decades, high-interest rates that prevent people from even touching their principal balance, and some graduate programs having uncapped borrowing.

Read the full article here.

As Biden makes a decision on student loan cancellation, 30 companies are offering employees assistance in the meantime

A harrowing 93% of borrowers have expressed that they’re not financially prepared for student loan payments to resume in September according to a survey conducted by the Student Debt Crisis Center. CNBC recently reported that a number of companies are planning to offer their employees assistance with paying back student loans.

“The Biden administration is currently deciding how to proceed with student loan [cancellation], and there are signs that the repayment pause may be extended yet again. But in the meantime, more employers are offering to help.

About 8% of employers offered student loan debt assistance in 2021 but 33% were considering adding it, according to the most recent data from Willis Towers Watson, a compensation consulting firm.”

Of course, different companies are considering different solutions and ways to help their employees keep up with student loan payments. This includes tuition reimbursement, loan refinancing options, loan consolidation, direct financial contributions, and financial counseling.

More employers are moving towards providing benefits that include helping their employees pay off their student loans. While this will make payments easier for borrowers to manage in the meantime, this isn’t a solution for the larger problem at hand. As we move towards total debt cancellation, it’s important to stay up to date on other forms of debt relief and assistance.

Read more about this topic and see the list of 30 companies offering student loan assistance, here.

Household debt has grown by more than $2 trillion in debt since before the pandemic, but the effects are vastly different depending on your income

As household debt continues to rise, you may start to wonder just who holds that debt and how we got ourselves into this on-going debt crisis in the first place. Americans have accumulated $15.8 trillion in debt – a record high according to recent data from the Federal Reserve Bank of New York. The national debt continued to climb throughout the pandemic to the surprise of some economists. Federal economist Andy Haughwout found the rise of household debt especially unusual as the country entered a recession in 2020, which sharply contrasts the 2008 housing crisis. While the housing market crash ushered in a wave of people either paying off debt or facing foreclosure, the opposite has taken place over the past three years. Most Americans have fallen into even more debt this time around. 

We’ve seen a rise in home ownership during the pandemic as well, but not without consequences. The amount of housing debt has increased dramatically and, according to a recent report from Kera News, it also makes up the majority of debt held by American borrowers. 

“Housing debt makes up most of the debt Americans owe, about 71%. Even as home prices rose dramatically, people have continued buying homes. While older, existing homeowners refinanced their debt to get lower interest rates, most of the new mortgage debt belongs to younger people who bought homes for the first time or traded up to get more space.

As long as there aren’t tons of people buying more house than they can afford – and home values don’t drop dramatically – most economists say we’re not likely to see a housing-based recession like we did in 2008. By and large, mortgage debt is a long-term investment that helps stabilize family finances and build wealth, compared to debt from credit cards or payday loans that carry high costs that can erode a family’s financial security.”

Throughout the pandemic, wealthy Americans were able to sustain and even increase their economic status while low-income and middle class families felt the financial strain of falling further into debt. This, of course, isn’t a new phenomenon. Debt has frequently been a tool wealthy individuals could leverage and use for future financial gain. Accumulating debt might be looked at as nothing more than an investment for those in a higher tax bracket, but it places a disproportionate economic burden on the working class – especially marginalized groups. 

“That debt is hard to see if you only look at averages. On average, credit card debt declined during the pandemic. It dropped dramatically in the first year, and then started rising steadily since then. It remains below pre-pandemic levels.

Nonetheless, 30% of credit card holders told the financial services firm Bankrate their debt has increased, and that added debt burden is hitting hardest among parents with kids under 18, Millennials, and lower-income earners.

[Mechele Dickerson] said lower- and middle-income people were more likely to lose work and wages when the pandemic hit, and less likely to have paid time off when childcare fell through or an illness at home kept them from working. And they started the pandemic without much financial cushion.

Most Americans reported increased savings as they cut spending and benefited from the federal interventions to prevent economic collapse; expanded tax credits, stimulus payments, rental assistance, student loan and mortgage forbearance, as well as business loans. But savings rates have fallen below pre-pandemic levels in 2022.

While those federal relief programs failed to reach everyone equally, Dickerson said they helped a lot of people stay whole.

‘But you have to balance that with the medical debt that a lot of [lower- and middle-income] people incurred because rich people didn't have the COVID infection and mortality rates in the way that poor people did,’ Dickerson said.

More than half of those infected with COVID-19 are now struggling with medical debt, according to the health care-focused Commonwealth Fund, disproportionately burdening Black, Latino and low-income people, who are least likely to have affordable health care. That’s even as medical debt overall declined during the pandemic, with more comfortably situated households paying down old debt.”

Read the full article.

Student loan payments are still set to resume September 1st – here’s everything you need to know in preparation

Since the start of the COVID-19 pandemic, back in March of 2020, federal measures have been put in place to combat the financial hardships Americans have faced as a result. As other COVID-19 safety measures and mandates have wound down, the pause on federal student loan payments is rapidly nearing its end. Market Watch recently broke down a list of options some borrowers will have should the Biden Administration fail to provide Americans with the much needed relief of another extension on the pause or – better yet – student loan cancellation. While it’s important that we continue to urge President Biden to extend the pause on student loan payments and advocate for complete cancellation, borrowers should also prepare for payments to resume after August 31st and understand what that could mean for their financial future. 

“It’s time to start thinking about how you will make payments when the payment pause ends. Firstly, make sure you have updated your contact information with your lender so you can get all the important updates on your payment obligations. Beyond that, here are some things to consider:

While you’re still free from making any payments or seeing your wages garnished for collection, consider bringing defaulted loans current if you can. Rehabilitating your loan will halt garnishment and other collection actions, such as having your tax refund seized. It also allows you to access benefits such as deferment, forbearance, a choice of repayment plans and loan forgiveness.”

The call for President Biden to take action and cancel student loans is more urgent than ever before. We’re asking that Biden cancel ALL student loans, without unnecessary means-testing, and provide the much needed economic relief that will help more than 43 million Americans. At Debtless, we know that debt cancellation is the most effective way to restore financial stability and freedom to communities across the country.

Read the full article here.

NAACP to discuss student debt crisis at annual convention

Last weekend kicked off the NAACP’s annual convention and representatives have identified  student debt as one of the “3 alarming crises” White House officials will be asked to address this week. 

The convention will feature guest speakers like Vice President Kamala Harris, Labor Secretary Marty Walsh, Housing and Urban Development Secretary Marcia Fudge, Assistant Attorney General at the Department of Justice Kristen Clarke, and Democratic Reps. Ro Khanna and Cory Booker – just to name a few. 

Along with topics such as voting rights and the Supreme Court’s decision to overturn Roe v. Wade, the student debt crisis will be discussed as a crucial issue impacting Black Americans and swaying Black voters in the upcoming midterm elections. Business Insider recently weighed in on the effects of student debt on Black borrowers: 

“When it comes to student debt, millions of voters are waiting for President Joe Biden's announcement of relief. He is reportedly considering $10,000 in loan forgiveness for borrowers making under $150,000 a year, but with student-loan payments set to resume after August 31, the clock is ticking for a final announcement. It's an issue that disproportionately impacts Black borrowers.”  

Black borrowers are more likely to take out student loans to begin with than their white counterparts, and while the median white borrower will owe just 6% of their student debt 20 years after entering college, the median Black borrower will still owe 95% of their debt over the same period.

The hope for many in attendance at the conference this week is that White House officials will address whether or not there will be an extension on the student loan pause that is set to expire on August 31. 

Borrowers are trapped in a worrisome waiting game, and every day is a new day of cautious optimism that President Biden will either extend the pause on student loan payments or fully commit to student debt cancellation.

Read the full article here.

Debt and the pandemic's lasting affect on Black women

The lasting impact of COVID-19 has set back millions of Americans financially – especially BIPOC and women as reports indicate. The Seattle Medium recently summarized a new report by the Center for Responsible Lending (CRL) stating that among those affected by the pandemic, Black women disproportionately lost their ability to repay outstanding student debt as a result. With women and communities of color already bearing the brunt of student loans, the pandemic only made matters worse. 

“The report painted a stark picture for women now and as they continue recovery efforts into the future. Key findings include:

- Due to increased childcare responsibilities, as well as the high-contact, low-wage nature of many women’s occupations, women of color and women who could not work remotely have less job security today than pre-pandemic.

- The economic gains made through 2021 were not shared equally across racial groups. Women of color continue to experience difficulty paying for necessities such as food and housing.

- Student loan debt burdens remain at staggering levels, despite the payment pause. Black women and Latina borrowers typically have higher student loan balances than white women, making repayment more difficult.

- Although the focus group participants found the student loan payment pause helpful, they worry about their ability to start paying again once payments resume.

- Because of their difficulties in repaying student loans, women are reluctant to incur more student loan debt for themselves or their children.”

Debt forgiveness is a racial and gender justice issue, and we have to treat it like one. Women currently hold two-thirds of all federal student loan debt – this burden weighs heavily on women of color especially, widening both gender and racial wealth gaps in the U.S. 

Read the full article here.