Eleven Republican-led states have initiated a legal challenge against President Biden’s new student loan repayment program, alleging similarities to a previously invalidated debt relief initiative. Led by Kansas Attorney General Kris Kobach, the lawsuit contends that Biden’s Saving on a Valuable Education (Save) program exceeds his constitutional authority and mirrors a past forgiveness plan that the Supreme Court struck down last year.

Allegations and Legal Basis

The lawsuit, spearheaded by Kansas AG Kris Kobach, asserts that President Biden’s Save program constitutes executive overreach and draws parallels to a previously rejected debt relief initiative.

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Description of the Save Program

President Biden’s Save program, launched in October, aims to provide reduced monthly payments and an accelerated path to loan cancellation for millions of borrowers. While it has already relieved the debts of over 150,000 participants who borrowed under $12,000 and made payments for a decade, its projected cost varies significantly. The Biden administration estimates the program to cost $156 billion over a decade, whereas the Congressional Budget Office predicts a higher figure at $230 billion.

Legal and Administrative Responses

Kansas AG Kobach criticized the Save program, accusing the president of pushing forward despite past legal setbacks. The Education Department refrained from commenting on the lawsuit but reiterated its commitment to enhancing the student loan system and offering relief to borrowers.

Legal Grounds and Previous Challenges

The lawsuit draws upon arguments from previous legal battles against broad-based debt relief. Unlike the failed plan that relied on a 9/11-era law, the Save program derives its authority from the Higher Education Act, presenting a different legal foundation.

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Program Mechanics and Conservative Criticism

The Save program, an adaptation of the existing Revised Pay as You Earn (Repaye) plan, ties monthly payments to income and family size. However, conservatives like Kobach argue that widespread debt relief unfairly burdens taxpayers who did not attend college or save for their education.

Legal Landscape and Political Response

The lawsuit follows the Supreme Court’s rejection of a similar debt cancellation program last year, highlighting the ongoing legal and political battles surrounding student loan relief initiatives. Missouri Attorney General Andrew Bailey expressed support for Kobach’s lawsuit and hinted at filing a related one.

Administration’s Perspective

Despite facing legal challenges, the Biden administration continues to advocate for the Save program, emphasizing its potential to alleviate the financial burden for millions of borrowers by reducing their annual payments.

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On Tuesday, the U.S. Supreme Court began hearing two cases challenging President Joe Biden’s student loan forgiveness plan, which would forgive up to $20,000 in debt for more than 40 million Americans. However, due to legal challenges, all the relief has been put on hold, and the Education Department stopped taking applications in November.

The plan Biden announced last August would cancel $10,000 in federal student loan debt for those earning less than $125,000 or households with less than $250,000 in income. Pell Grant recipients, who typically come from lower-income households, would receive an additional $10,000 in debt forgiveness for $20,000. Federal student loans taken out for graduate school, including federal Graduate PLUS loans, can qualify for forgiveness under the plan.

The Supreme Court, dominated 6-3 by conservatives, will have an ultimate say on whether Biden can wipe out student loan debt, fulfilling his campaign pledge in 2020. So far, Republican-appointed lower court judges have kept Biden’s plan from going into effect. It remains to be seen how the justices will rule, but their questions in the oral arguments on Tuesday will give insight into what they are thinking.

Debt forgiveness, if it goes ahead, is for borrowers holding federal student loans, not private loans. To determine what kind of loans you hold, log in to the Federal Student Aid website, studentaid.gov. Direct loans, including Parent Plus loans, qualify. Some older FFEL and Perkins loans are also eligible if owned by the Department of Education. For people holding older FFEL loans, consolidating those loans can lead to credit for forgiveness under specific income-driven repayment plans.

During the pandemic, two presidential administrations paused payments for those holding federal student loans. The pause has been extended to as late as this summer. Payments are set to resume, along with the accrual of interest, 60 days after the court cases are resolved. For example, if legal issues remain at the end of June, payments would restart at the end of August. If the court issues a ruling in March, repayment could restart as early as May or June. If the cases haven’t been resolved by June 30, payments will start 60 days later.

If Biden’s administration loses its court appeals, advocates point to other ways the debt might be forgiven, including through the Higher Education Act. However, Biden’s administration is not saying whether it is exploring other options for canceling the debt.

About 26 million people have already applied for debt forgiveness, and 16 million applications have been approved. If the Supreme Court approves the plan, nearly half of those people could have their federal student debt eliminated.

In conclusion, the Supreme Court’s decision on Biden’s student loan forgiveness plan will significantly impact millions of Americans struggling with student debt. While the outcome remains uncertain, borrowers should take the opportunity to understand their loan types and eligibility for forgiveness. It is also essential to remember that even if the plan is not approved, there may be other options for debt relief in the future. For now, borrowers should continue to monitor the situation closely and prepare for the possibility of loan payments resuming later this year.

REFERENCES:

Supreme Court student loan hearing: What you need to know

The post Understanding the Implications of Student Loan Hearing at the Supreme Court first appeared on JDJournal Blog.

As it turns out, getting hitched and having kids is not a popular choice when you are saddled with $100,000 in student loans.

According to a recent survey conducted by the American Bar Association, young attorneys are putting off big life decisions like marriage, kids, and homeownership due to crushing student debts.

The ABA Young Lawyers Division conducted an online survey from March 1 to March 31, 2020, among more than 1,000 young lawyers in the early stages of their careers with a goal to quantify the impact of the educational debt on new lawyers’ career paths and life decisions. 

The survey found that the median cumulative debt at law school graduation among those who completed the survey was $160,000, which is close to the national average of cumulative debt for all law school graduates of $145,500 in 2016, according to the U.S. Department of Education.

More than half of the respondents — 56% — said they put off the decision to buy a house because of their student debt, while 29% said they either decided to not get married because of debt or opted to postpone getting married. And almost half of the survey respondents — 48% — said because of their debt they are either delaying or deciding not to have kids altogether.

Young lawyers had to put on hold decisions like buying a car or going on vacation. Nearly half (46%) of respondents said they postponed or decided not to buy a car because of their debt and 33% said they got a less expensive car than they originally wanted. More than half (58%) said they postponed or decided not to take a vacation because of their debts.

“Participants said heavy student loan debt is affecting virtually every aspect of their lives,” reads the debt portion of the ABA’s 2020 Profile of the Legal Profession.

The Education Department is due to release an updated figure later this year. Among all law school graduates, 71% took out educational loans in 2016, which is down from 92% in 2008.

Out of the 1,1000 ABA survey respondents, 40% said their student loan load increased notably since their graduation, and one-quarter of the survey respondents provided open-ended responses about the shadow that educational debt has cast on their lives.

“There was an underlying theme of unhappiness, frustration, and fear stemming from loan burdens,” the report reads. “Many mentioned issues with mental health and some cited depression. Others mentioned an inability to save for the future or retirement, as well as difficult choices related to healthcare for themselves or their family.”

According to the survey, Hispanic and Black attorneys have higher student debts than their caucasian peers, as two-thirds of the Black attorneys who responded to the ABA’s poll said their debt is higher now than when they graduated law school.

Crushing student debt is not only influencing the life path of new attorneys but it affects their career paths as well. Among the survey respondents, 37% said they chose a job that paid more over a job they actually wanted. And 17% said they opted for a job that qualifies for student loan forgiveness over a preferred option. 

Among all doctoral graduates in 2016, the average cumulative debt for law students was in the middle of the pack. The average debt was higher for medical students ($246,000) and doctoral students in health science professional practices ($202,400). Average debt was lower for Ph.D.s in education, ($111,900), Ph.D.s in fields other than education ($98,800), and doctorates that are not Ph.D.s ($132,200).

The post Young Attorneys Delay Marriage and Kids Due to Student Debt first appeared on JDJournal Blog.

Summary: Refinancing your law school loan debt is a useful money-saving move, but is it right for you?

With the price tag on legal education growing steeper every year, it’s become common for most law students to head into the real world not only with a degree but also with about six figures in student loan debt. According to the Board of Governors of the Federal Reserve System, as of March 2019, U.S. student loan borrowers owed a collective $1.6 trillion in federal and private student loan debt. 

Approximately 60 percent of law graduates borrow more than $100,000, according to a report by Gallup and AccessLex Institute. Unsurprisingly, many graduates and aspiring attorneys find refinancing law school loans to be a worthwhile strategy to ease the burden of repayment, as it could mean you’ll pay less over the life of your loan.

That being said, refinancing might not be suitable for everyone.

In this guide, we’ll explain what refinancing is, how to know if refinancing student loans it’s the right option for you, and how to refinance law school loans.

Refinancing Student Loans is Not the Same as Consolidating Debt

Student loan borrowers may have heard the words “refinancing” and “consolidation” used interchangeably, but they’re actually two different repayment options.

Just like many other student loan borrowers, you may find this confusing, as both options essentially do the same thing: they replace your existing student loan with a new loan with new terms. 

So what’s the main difference?

Refinancing your law school debt means you take out a new loan that pays off the existing loans, usually at a lower interest rate. 

Consolidation only applies to federal loans and refers to bundling multiple loans into a single one through the federal government, so you can make a single monthly payment. Consolidation may simplify your monthly payments or give you access to better repayment plans or forgiveness programs. 

Can you refinance federal student loans?

You can refinance both federal and private student loans. However, an important thing to know is that when you refinance federal student loans, you’re privatizing them. Meaning you can refinance federal student loans through private lenders, but you can’t transfer private loans to the federal government.

Refinancing private or federal loans could give you a lower interest rate. However, refinancing a federal loan means you no longer qualify for some federal loan benefits such as loan forgiveness, forbearance programs, and income-driven repayment options.

What do you need to be eligible for refinancing?

Whether you’re refinancing federal student loans, private student loans or a mix of both, lenders are looking for borrowers who have:

A good credit score

Your credit score not only determines whether you are eligible for refinancing, but it can also determine the interest rate you’ll get. Typically you need a credit score that is in the high 600s. Many private lenders, however, only consider borrowers who have scores in the 700s or higher.

Borrowers with low credit scores may be able to qualify by applying with a co-signer. Remember that your cosigner is putting his or her credit on the line, so it’s advisable to see if your lender offers features like a cosigner release, which removes the cosigner from the loan after a predetermined period of time in which you’ve proven you can make your payments.

A history of on-time loan payments

Lenders have to make sure that you will be able to pay off the debt. Therefore, they will likely check your credit report to find evidence that you’ve paid your loans regularly in the past.

Enough income to pay your debts

Lenders will also analyze your capacity to repay the refinanced law school loan. Some calculate the amount of debt you owe relative to your income.

The required debt-to-income ratio for student loan refinancing is generally 50% or lower. A DTI of 20% or less is excellent.

When to Refinance Student Loans

You should consider refinancing in these circumstances:

You have private loans with high variable rates

Interest rates are expected to surge through 2020, meaning that loans with variable rates may get even more expensive to repay. Therefore you should consider refinancing to lock in a fixed rate. 

You have private loans with high interest rates

The point of refinancing your loans is to get a lower interest rate than what you already have on your original loan. The higher your current rate, the more likely you are to save money by refinancing at a lower rate.

Your credit score has improved dramatically

If refinancing doesn’t seem like an option when you graduate law school, consider it once you have a significantly better credit score.

Can you refinance student loans while still in school?

While many lenders won’t let law students refinance loans while still attending school, there are are two exceptions such as Earnest and SunTrust who consider students eligible for refinancing. 

For many, refinancing makes sense only after finishing law school – it gives you time to build your credit history, find a job, and become eligible for the best possible rates. 

However, if you already have a great credit while in school or have some savings on the side, you should consider refinancing as it will enable you to pay off your debts much faster. 

When should you not refinance student loans?

You generally can’t or shouldn’t refinance if:

You have federal loans and see a drop in income

If you are between jobs or considering leaving the workforce for a period of time you should stay away from refinancing your federal loans.

You’re pursuing student loan forgiveness

Refinancing federal loans means you can’t apply for federal loan programs including Public Service Loan Forgiveness and Teacher Loan Forgiveness.

You’ve recently defaulted on student debt

If you have a default in your past, that most likely is a red flag for lenders. It takes typically seven years for the default to be wiped from your credit report. 

The post How to Decide if Refinancing Law School Loans is Right for You first appeared on JDJournal Blog.

Summary: One of the country’s largest student loan service companies has been accused of misleading borrowers.

As if we needed another reason to hate student loan companies. On Wednesday, a lawsuit filed by the Consumer Financial Protection Bureau accused one of the nation’s largest student loan service providers of lying to borrowers in order to drive up their debts, according to The New York Times.

Student loan servicer, Navient, handles the loans of almost 12 million people. This week, they were accused of misleading borrowers and intentionally making mistakes during the collection process in order to gain more profit. Examples of their alleged bad deeds include mishandling payments and burying details such as how students can lower their rates in fine print. These actions led to Navient illegally driving up loan repayments.

Richard Cordray, the director of the consumer bureau, told The New York Times that Navient “used shortcuts and deception to illegally cheat struggling borrowers out of their rights to lower payments. These unlawful practices have cost student loan borrowers across the country both heartache and money.”

The consumer bureau and two state attorney generals filed the lawsuit against Naviet, which handles $300 billion in loans. For an additional perspective of how far Naviet’s reach is, the loan service company is in charge of 25% of all federal and private loans taken by students. It’s noted that Naviet does not provide the money, but it holds lucrative contracts to collect payments on the behalf of banks and lenders. In 2014, it split from another litigation-magnet, Sallie Mae, which faced its own similar lawsuit.

According to Illinois attorney general Lisa Madigan, Navient’s fraudulent deeds may have touched every one of its customers. She said that the damages the government is seeking could be in the billions of dollars.

Navient, however, has denied any wrongdoing. Despite the lawsuit, it will continue to hold a government contract to service student loans until 2019.

“The allegations of the Consumer Financial Protection Bureau are unfounded, and the timing of this lawsuit — midnight action filed on the eve of a new administration — reflects their political motivations,” Patricia Nash Christel, a company spokeswoman, said to the New York Times. “We will vigorously defend against these false allegations.”

Source: The New York Times

• Related: Don’t Overlook Government Jobs, They Can Pay Back Student Loans
• Related: How Can You Get Student Loans Forgiven 

What do you think of the allegations against Navient? Let us know in the comments below. 

The post Student Loan Collector Navient Sued for Cheating Borrowers first appeared on JDJournal Blog.

Summary: What law schools will leave you the most in debt? The following list may surprise you.

Going to law school is a tough decision for everyone. Not only because it’s a guaranteed three years of your life in mental anguish, but also because the cost combined with the somewhat bleak job outlook would make any rational person pause.

• Related: 2017 U.S. News Best Law Schools List 

Fortunately, potential law students can arm themselves with information about how expensive their future law school actually is. U.S. News and World Report analyzed the indebtedness of law school graduates in 2015, and they discovered a huge gap between the school with the highest student debt, Thomas Jefferson School of Law, and the least, University of Hawaii-Manoa. To no one’s surprise, the majority of graduates had student loan debt, but what was shocking about this list was that even the non-top ranked schools came with a heavy price tag for students.

For example, the number one law school with the highest indebtedness was Thomas Jefferson School of Law in San Diego. The expensive school made headlines earlier this year when its former student, Anna Alaburda, sued it for false advertising.The case had been closely watched in the legal community because the alumni claimed she was unable to get an attorney job after graduation and that the school inflated its employment data. The case went to trial and she lost; however, Alaburda may have won another victory. The accusations of Thomas Jefferson graduates not getting jobs combined with the average indebtedness of $172,726 will forever tarnish the school’s reputation to potential students who are able to Google.

Columbia University and New York University were the next law schools with the highest average indebtedness for 2015 graduates. However, unlike Thomas Jefferson, Columbia and NYU are top ranked, which somewhat justifies their students’ indebtedness of $168,627 and $166,022, respectively.

• Related: Best Law Schools for Job Accessibility 

Columbia was the 4th Best Law School on U.S. News 2017 list and 1st on The National Law Journal’s Go-To Law School list. Harrison Barnes of BCG Attorney Search said that Columbia students tend to gravitate towards high-paying law firm jobs, which makes sense because so many of the majors are located nearby.

Like Columbia, New York University has close proximity to major law firms, which is a draw for the 96.7% of students who find employment ten months after graduation.

In addition to compiling indebtedness data, U.S. News ranks the top law schools based on factors such as how hard it is to get in and job prospects. Out of the 2017 list, Arizona State University is the most affordable out of the top 25 schools. Only 55% of its graduates have debt, and the average amount of debt is $106,426, which is much more affordable than Thomas Jefferson. According to JD Journal, ASU in Tempe, AZ offers in-state students a reduced rate of $27,074. Out-of-staters can expect to pay $42,794.

The large percentage of law schools on this list had average student indebtedness in the six figure range, and there was a good portion of schools with students in debt in the $80K and $90K range. On the low end, the cheapest schools still left their students with almost $60K in debt. Those were the University of Nebraska – Lincoln ($58,744), University of South Dakota ($57,170), Belmont University ($56,225), and University of Hawaii – Manoa ($54,988).

Source: U.S. News and World Report

• Related: Business Insider’s List of the Best Law Schools 
• Related: Best Law Schools by Salary Potential 

What do you think of the price of law school? Let us know in the comments below.

The post Law School Debt Rankings – Law Schools with the Highest Debt first appeared on JDJournal Blog.

Summary: A Pace Law School graduate was allowed to discharge her bar study loan with her Chapter 7 bankruptcy filings despite it being an educational related loan.

A federal judge has opened up a whole new window when it comes to bankruptcy and student loans. Traditional student loans are not included in bankruptcy protections but Judge Carla Craig of the U.S. Bankruptcy Court for the Eastern District of New York ruled that bar study loans are different.

Lesley Campbell, a 2009 Pace graduate, was fighting to eliminate her $11,000 bar study loan from Citibank in her bankruptcy filings. The loan provider argued that the loan was an educational loan so it was not allowed to be discharged due to financial hardship like other loans can be.

Read Bankruptcy Cases Could Increase with Student Loan Debt.

Campbell was represented by William A. Brewer III from Brewer, Attorneys & Counselors pro bono. He stated, “This opinion confirms what we have believed all along – that these types of loans are dischargeable. We believe this is a seismic development. It flips the script for thousands of people who our client believes have fallen victim to predatory loan practices and been told they cannot discharge these loans.”

Shortly after graduating from law school, Campbell took on the $16,000 loan to study for the bar exam, pay for a Barbri course, and pay for living expenses while she studied. She did not pass the bar exam. She mad payments on the loan until 2012 and then filed for bankruptcy in 2014.

See Why a Would-Be Lawyer Is Stuck With a $260K Student-Loan Debt to learn more.

Previous courts have generally sided with the loan providers, ruling that bar study loans fall under the category of an “educational benefit.” Craig disagreed with the other courts findings stating that those courts just assumed that the Bankruptcy Code “encompassed any loan which relates in some way to education.” She focused on the part of the code that includes that the discharge of loans applies to federal and federally backed lenders. Craig also dismissed the lenders argument that in order to qualify for a bar study loan, the borrower had to be a law student, stating, “This argument could be advanced by the myriad private lenders who provide funds to borrowers who are taking educational or training courses.”

Citibank, the loan provider, was represented by Casey Howard and Samantha Ingram of Locke Lord.

Source: http://www.nationallawjournal.com/home/id=1202753454990

Photo: gadebtrelief.org

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Summary: Universities, students, and the ABA understand that student debt is out of control so extra effort is being done to decrease the amount and help students understand loans better.

Receiving an education is not cheap. Student loans affect almost all college graduates and those that go on to graduate school are sometimes left with loans that are unmanageable. Law schools are no exception. In 2012 the average graduate from a private school has $122,158 in loans and from a public school, graduates end up with $84,000, according to the American Bar Association.

The Financing of Legal Education has established a 15-person ABA Task Force to take on the issues concerning student debt. The force came up with several possible resolutions involving better financial counseling for students on loan and repayment programs. The American Bar Association House of Delegates will take on the suggestion that law schools offer more debt counseling and financial transparency to current and future students.

The former president of the ABA, Dennis Archer blames a lot of the lack of funds for students to qualify for from a lack of state support to colleges and universities. To make up for the lack of support, those schools have had to raise tuition.

How law schools offer the counseling and debt support will be up to them to decide. They want the schools to experiment and find what works for them best. The Task Force also suggested coming up with alternative ways of cutting costs for students. William Mitchell College of the Law in St. Paul is trying out a hybrid law degree for the classes that can be done online. Northwestern Law is making their three year J.D. degree possible to be done in two.

Everyone understands that achieving an education isn’t going to be cheap but it is in everyone’s best interest to find ways to make it more accessible and less expensive so a student’s debt can remain lower.

Source: https://bol.bna.com/aba-mulls-law-school-debt-counseling/

Photo: finance.yahoo.com

The post Student Loan Reformation Being Addressed by the ABA first appeared on JDJournal Blog.

Last week, President Obama went pitching for affordability in college education from all angles possible in his two- day bus tour of upstate New York.

On Friday, speaking to a gathering of students and faculty at the University of Binghamton, Obama observed “I think law schools would be wise to think about being two years instead of three.” His take was that it was better for law students to spend the third year working under practicing lawyers.

At Binghamton, Obama repeated his stance on college affordability that he presented earlier on Thursday at the University of Buffalo. Talking to a crowd of about 7,000 there, he unveiled a new government rating system that would judge schools on affordability and the ratings would affect federal financial aid allocation. He emphasized that “Higher education cannot be a luxury.”

The new rating system may come into existence before 2015 school year as it does not require congressional approval, and the White House is attempting to put it into place as soon as possible. However, congressional support would be needed if the rating system is used as a basis to allocate federal aid.

One of the proposals made by the President requires that in colleges with high dropout rates, students be not paid in lump sum, but over the course. This is aimed to ensure that students who drop out do not receive funds for the time that they do not attend school.

At Binghamton University, Obama said that college-student debt needs to be controlled and that states should spend much more on higher education than they are currently spending.

Obama promised, “We’re going to cap the monthly payment you have to make at 10 percent of your income … That way, it’s manageable. You don’t have to make career decisions based on how you can pay back your student loan.”

He told the students amidst laughter that he didn’t expect all the proposals to be popular.

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