New Student Loans Rules Announced

The Law Office of Malik W. Ahmad knows the value of quality education and the expenses associated with it. We send our children to college and universities just like anybody else and now the burden of student loans very well. We like to help clients who have student loans and associated problems in our office all the time. New student loans rules are announced. They are not comprehensive but at least a solid beginning for millions of students who have messed up their lives because of non payments and their credit scores. The Education Department have announced new rules which would protect students and give them some rights under the federal education loans. These rules are good as the new regulations will make it easier for distressed borrowers to get out of default and repay their loans. As per NY Times, (published in the latest article) more than 600,000 federal student loan borrowers who began repaying their debts in 2010 defaulted on their loans by 2012, according to federal data. Almost half — 46 percent — attended for-profit colleges, which also had higher average default rates than other schools. For-profit schools had an average default rate of almost 22 percent, compared with about 15 percent for borrowers across all colleges.
– those who are in default on federal student loans may “rehabilitate” them by making nine on-time payments in amounts that are “reasonable and affordable.” Rehabilitation lets the borrower get out of default and become eligible for further federal student aid.
– This, however, is not implemented equally and justifiably as some private debt collectors under contract with the government are failing to offer payments that former students could afford.
– They are still offering a percentage payments instead offering payments based, for instance, on a percentage of the borrower’s total debt. Because this involves commission of the debt collectors and they always insists on higher payments.
– The Education Department requires that borrowers who want to rehabilitate loans must first be offered a payment amount similar to what would be offered under the federal income-based repayment program. That option, meant to help borrowers who have high debt in relation to income, caps a borrower’s monthly payments at 15 percent of his or her monthly income.
– Now, borrowers can get the income-based offer first, and move on to the more complex form if they reject the income-based offer for some reason.
– In addition, some debt collectors had demanded minimum monthly payments without disclosing more affordable alternatives, even though federal student aid law does not require minimum payments. The rules specify that payments in rehabilitation must not be a required minimum amount.
– The new rules also allow borrowers who have been delinquent at least nine months to request “forbearance” on their loans orally, rather than in writing. When a loan is in forbearance, borrowers do not have to make monthly payments, but interest continues to accrue and is added to the loan balance, leaving them further in debt.
– To help make sure that borrowers are not pressured into forbearances that they do not want, however, the rules limit forbearances based on oral requests to 120 days and require that a borrower also receive written information about the forbearance agreement and how to get out of forbearance status, as well as repayment alternatives.
– Most take effect July 1 of next year. But lenders and schools may carry out some of the rules, like the one on forbearances, right away if they choose.
– They apply to loans made or guaranteed by the federal government.
– Complaints can be made to the Education Department at http://www.myeddebt.com.

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