College Students Need to Be Cautious of Federal Tax Scam
The IRS and FTC are warning college students that scammers are posing as IRS agents and demanding that students pay a bogus federal student tax or face arrest or other penalties. The scammers employ several techniques to make the calls sound legitimate, including using so-called caller ID spoofing, in which incoming caller ID information appears on people’s phones as “911” or as the name of a government agency. Learn more about this crime and how to prevent it.
4 States Offering Generous Student Loan Forgiveness Programs
U.S. News & World Report recently reported on state student loan forgiveness programs, revealing which are among the most generous in specific locations and fields. Read the full report to get program details in Alaska, California, New York and North Dakota.
CFPB Cracking Down on Banks, Other Financial Companies for “Auto Defaults”
In March 2016, the Consumer Financial Protection Bureau (CFPB) released its latest supervision report where the exams of banks and nonbanks resulted in the remediation of $14.3 million to approximately 228,000 consumers. In its examinations covering the last months of 2015, CFPB examiners found one or more student loan servicers engaged in an unfair practice by automatically defaulting on certain private student loans.
As the CFPB highlighted last year, some private student loan promissory notes contain an “auto default” clause that lenders trigger to immediately demand payment on the entire loan amount if a co-borrower files for bankruptcy or dies. Examiners found one or more student loan servicers made the entire loan due when a loan’s co-borrower filed for bankruptcy, regardless of whether the borrower was current on all payments. These auto defaults were unfair because a reasonable consumer would not likely interpret that clause in the contract to mean they would default based on their co-borrower’s bankruptcy. Further, one or more servicers did not notify the borrower that the loan was in default.
Get the full report here
CFPB Takes Action to Shut Down Illegal Student Debt Relief Scheme
On March 15, 2016, the Consumer Financial Protection Bureau (CFPB) requested that a federal district court enter a final judgment and order that would shut down a student debt relief scheme that charged borrowers millions of dollars in illegal upfront fees for federal student loan services. If approved by the court, the proposed judgment would ban the company, Student Loan Processing.US, and its sole owner, James Krause, from any future involvement in debt relief and student loan services. The order would also require the company to pay refunds to thousands of harmed consumers and a civil money penalty.
Student Loan Processing.US also operates under the name IrvineWebWorks, Inc. and runs websites at StudentLoanProcessing.us, StudentLoanProcessing.org and slpus.org. The student debt relief company has been in operation since at least May 2011 and its customers are located throughout the United States. Learn more about the compliant and actions here.
New Repayment Option for New York Borrowers
Starting in 2016, New York State will accept applications for the new ‘Get On Your Feet’ Loan Forgiveness Program, which offers up to 24 months of federal student loan debt relief to recent college graduates living in the state.
To qualify, applicants must have earned an undergraduate degree from a college or university located in New York in or after December 2014, have an adjusted gross income of less than $50,000, and be enrolled in the federal Income Based Repayment plan or Pay as You Earn plan. Recipients will have a maximum of 24 payments, equal to their monthly student loan repayment amount, paid on their behalf. Applications are accepted year round. Learn more about this program.
CFPB Report Reveals Trouble for FFELP Borrowers, Solutions with Income-Driven Repayment
The Consumer Financial Protection Bureau (CFPB) released its annual report on student loan complaints, revealing at least 30% of Federal Family Education Loan Program (FFELP) borrowers – more than five million in total – are behind or in default on their loans. Students who borrowed money through FFELP, a program that ended in 2010, make up nearly a third of all student loan debtors and owe more than $370 billion in outstanding debt.
The report indicates FFELP loans show a higher rate of default and delinquency than the broader student loan market, raising concerns about whether servicers of the loans have adequately informed these borrowers about repayment options. Despite widespread availability of income-driven repayment plans, 95 percent of borrowers are not enrolled in any plan. Learn more about the report’s findings.
Student Loan Forgiveness Scam Alert
Fake student loan deals are circulating via email and social media, claiming to erase student loan debt through a new government program or policy. Get the details from the Better Business Bureau.
CFPB Orders Discover Bank to Pay $18.5 Million for Illegal Student Loan Servicing Practices
The Consumer Financial Protection Bureau (CFPB) took action against Discover Bank and its affiliates for illegal private student loan servicing practices. The CFPB found that Discover overstated the minimum amounts due on billing statements and denied consumers information they needed to obtain federal income tax benefits. The company also engaged in illegal debt collection tactics, including calling consumers early in the morning and late at night. The CFPB’s order requires Discover to refund $16 million to consumers, pay a $2.5 million penalty, and improve its billing, student loan interest reporting, and collection practices. View the full report.