More than ever before, student loans are affecting people long after they graduate. According to recent data, the collective American student loan burden is over $1.4 trillion spread out over some 44 million borrowers. It is now higher than national credit card debt.
Not surprisingly, people are increasingly struggling to repay growing student loan burdens. In 2016, graduates left college owing on average $28,000, an amount that often takes more than a decade to repay. While some people struggle to make a payment of over $300 a month, roughly 11 percent end up in delinquency or default.
The statistics are sobering, but thankfully, there are options available for people who aren’t able to get ahead in their repayments. There is plenty of information available to borrowers who need help. For many former students, it’s beneficial to turn towards a trusted organization that can offer support and information free of charge.
While some people opt for refinancing options or an income-based repayment plan, there is another interesting option called the Borrower Defense Repayment program. This program is for people who believe they were misled by their college or university into securing a student loan in the first place.
What is the Borrower Defense Repayment Program?
In essence, the Borrower Defense Repayment program was invoked in late 2016 in response to growing concerns with some educational institutions defrauding students under state law. The Department of Education chose to implement this long forgotten aspect of student loan regulation due to a series of litigations against educational institutions which ultimately led to their closure. Under previous rules the taxpayer would end up footing the bill, even if the school was found at fault. To rectify this issue the Department of Education updated the federal regulations to offer debt forgiveness to students who have been defrauded or misled by their schools and then have the school repay their debts instead of the federal government.
Students who carry debt under the Federal Direct loan program are eligible to apply. Students using other loan programs such as the Perkins, Federal Consolidations, or Stafford loans cannot apply. It is up to the applicant to prove the school purposefully defrauded them, which can include cases where the school inflated post-graduate job statistics, total education costs, programs offered, or any other situation which would have led to student loan debt. According to the Federal Student Aid eligibility criteria,
Specifically, you may assert borrower defense by demonstrating that the school, through an act or omission, violated state law directly related to your federal student loan or to the educational services for which the loan was provided. You may be eligible for borrower defense regardless of whether your school closed or you are otherwise eligible for loan forgiveness under other laws.
Applications can be made online through Federal Student Aid, however it can often be beneficial to work with a non-profit loan assistance organization to ensure all documentation is provided and supportive.
Where Does the Borrower Defense Repayment Program Stand in 2017?
While the program was scheduled to go into full effect on July 1, 2017, the Department of Education put the Borrower Defense Repayment Program on hold indefinitely while it is being reworked. While many non-profit schools have applauded this decision, it has ultimately affected the prospects of many debt holders who attended private for-profit institutions. A disproportionately high amount of for-profit institutions have been found guilty of defrauding and misleading their students who will end up being left on the hook for their student loans.
There are currently 19 states taking the Department of Education to court for its decision to revoke the Borrower Defense Repayment Program. While the litigation is being played out through the legal system, the students who feel they have been defrauded can still apply for relief through other means, however these methods are often complex and drawn out over years. There are estimated to be roughly 68,000 applications through the Borrower Defense Repayment program which are now pending.
Are There Options for People With Private Student Loans?
As more students are being forced to turn towards private student loans, which are often at higher and less favorable rates, more people are left struggling to pay off these privately held debts. At the moment there are no federal assistance programs that target private student loans, but there are a few options open to former students who are feeling the strain of debt burden.
First, loan holders should speak with their bank about restructuring their loan terms. Some student loan lenders and banks offer decent refinancing options. Student loan refinancing allows you to consolidate your student loans together under one new interest rate and repayment term. How do you get a new rate and term? You essentially apply for a new loan to pay off the previous loans.
They may also be able to schedule a deferment to provide some relief. Secondly, for those who hold both federal and private student loans, it’s worth exploring relief for the federal portion while focusing all payments on the private side. Finally, for people who are drowning under a mountain of various debts (credit card, car, line of credit, etc.), consider refinancing options which will consolidate payments under one neat monthly payment.
Author: Jeff Gitlen
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