Tag: studentloansrelief

College Funding Changes In The Pandemic Relief Bill

There are several student financial aid provisions in the pandemic relief package that was included in the Consolidated Appropriations Act of 2021 that passed the House and Senate on Monday, December 21, 2020.

Student Loan Relief

Student loan borrowers are disappointed that the legislation did not include an extension to the student loan payment pause and interest waiver, nor did it provide any student loan forgiveness.

The payment pause and interest waiver is set to expire on January 31, 2021. President-elect Joe Biden will be able to extend it further after he takes office on January 20, 2021. Several possible extension dates have been floated, including April 1, April 30 and September 30, but Joe Biden has not yet said anything specific about the extension, just that it is needed.

Nevertheless, there are some changes in the legislation that affect student loan borrowers. In particular, the tax-free status of employer-paid student loan repayment assistance programs (LRAPs), which was set to expired on December 31, 2020, has been extended for five years through the end of 2025. Such LRAPs will be exempt from income and FICA taxes for both the employee and the employer.

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SULA, a complicated set of limits on subsidized Federal Direct Stafford loans, has been repealed. SULA mostly affected students who transferred from a 4-year college to a 2-year college.

In addition, there have been a few changes concerning the U.S. Department of Education’s Next Generation Processing and Servicing Environment (NextGen) for federal student loans.

  • New student loan borrower accounts must be allocated to loan servicers based on their past performance and servicing capacity.
  • Borrower accounts must be reallocated from servicers for “recurring non-compliance with FSA guidelines, contractual requirements, and applicable laws, including for failure to sufficiently inform borrowers of available repayment options.” Applicable laws include consumer protection laws.
  • NextGen must allow for multiple student loan servicers that contract directly with the U.S. Department of Education.
  • NextGen must incentivize more support to borrowers at risk of delinquency or default.
  • Borrowers must be allowed to choose their loan servicer when they consolidate their federal loans.
  • The U.S. Department of Education must improve transparency through expanded publication of aggregate data concerning student loan servicer performance.

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Changes in College Tuition Tax Breaks

The legislation changes the income phaseouts for the Lifetime Learning Tax Credit (LLTC) to be the same as the income phaseouts for the American Opportunity Tax Credit (AOTC), starting with tax years that begin after December 31, 2020.

The Lifetime Learning Tax Credit will start phasing out at $80,000 for single filers and $160,000 for taxpayers who file as married filing jointly. The tax credit is fully phased out at $90,000 (single) and $180,000 (married filing jointly). Married taxpayers who file separate returns are not eligible.

For comparison, the 2020 income phaseouts for the LLTC were $59,000 to $68,000 (single) and $118,000 to $136,000 (married filing jointly).

The new income phaseouts will not be adjusted for inflation.

In addition, the legislation repeals the Tuition and Fees Deduction, effective with tax years that begin in 2021. This is a permanent repeal, so the Tuition and Fees Deduction will not be resurrected by the next tax extenders bill.

New Funding for Higher Education Emergency Relief Fund

The $81.88 billion for the Education Stabilization Fund includes

  • $54.3 billion for the Elementary and Secondary School Emergency Relief Fund
  • $22.7 billion for the Higher Education Emergency Relief Fund (HEERF)
  • $4.05 billion for the Governor’s Emergency Education Relief Fund, of which $2.75 billion has been earmarked for Emergency Assistance to Non-Public Schools

The Higher Education Emergency Relief Fund previously received $16 billion as part of the CARES Act.

The allocation formula for the HEERF funding is more complicated than the one in the CARES Act, but the allowable uses are similar. Public and private non-profit colleges are required to use at least half of the money for financial aid grants to students. Private for-profit colleges are required to use all of the money for financial aid grants to students. Colleges must provide at least the same amount of emergency financial aid grants to students as they did under the CARES Act provisions, even if their total allocation is lower.

The emergency financial aid grants to students can be used for any element of the student’s cost of attendance or for emergency costs related to the pandemic, such as “tuition, food, housing, health care (including mental health care), or child care.”

The grants must be prioritized to students with exception financial need, such as Pell Grant recipients.

The emergency financial aid grants to students are tax-free.

Most College Students Remain Ineligible for Stimulus Checks

Most college students will remain ineligible for the recovery rebate checks, also known as the stimulus checks.

The legislation includes the same restriction that limits the $600 per qualifying child to children age 16 and younger. Only 0.1% of undergraduate students are age 16 or younger.

College students who are under age 24 are also ineligible, because they can be claimed as a dependent on someone else’s federal income tax return. The remain ineligible even if they are not claimed on someone else’s tax return.

A college student might qualify if they are married and file a joint return with their spouse or if they provide more than half of their own support. About 15% of undergraduate students are married. College students who are 24 years old or older may also qualify. More than 40% of undergraduate students are 24 years old or older.

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College students can still claim the $1,200 stimulus checks from the CARES Act in addition to the new $600 stimulus checks, if they are eligible.

Increase in the Maximum Pell Grant

The maximum Federal Pell Grant has been increased to $6,495 for the 2021-2022 academic year.

Eligibility criteria will be pegged to a multiple of the poverty line starting with the 2023-2024 academic year. Students will be eligible for the maximum Pell Grant if they and their parents/spouse, as applicable, are not required to file a federal income tax return or if their adjusted gross income (AGI) is less than 175% to 225% of the poverty line. The higher threshold is reserved for households involving a single parent.

FAFSA Simplification

The legislation simplifies the Free Application for Federal Student Aid (FAFSA) starting with the 2023-2024 academic year. The new FAFSA reduces the number of questions on the form by two-thirds, from 108 questions to about three dozen questions. Follow me on Twitter. Check out my website or some of my other work here. 

Mark Kantrowitz

Mark Kantrowitz

I am Publisher of PrivateStudentLoans.guru, a free web site about borrowing to pay for college. I am an expert on student financial aid, the FAFSA, scholarships, 529 plans, education tax benefits and student loans. I have been quoted in more than 10,000 newspaper and magazine articles about college admissions and financial aid. I am the author of five bestselling books about paying for college and have seven patents. I serve on the editorial board of the Journal of Student Financial Aid, the editorial advisory board of Bottom Line/Personal, and am a member of the board of trustees of the Center for Excellence in Education. I have previously served as publisher of Savingforcollege.com, Cappex, Edvisors, Fastweb and FinAid. I have two Bachelor’s degrees in mathematics and philosophy from the Massachusetts Institute of Technology (MIT) and a Master’s degree in computer science from Carnegie Mellon University (CMU)

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University of California Television (UCTV)

How to pay for college is a pressing question for all applicants from the class of 2020. COVID-19 has caused financial uncertainty and many are having to rethink their plans. Jodi Okun, an expert in financial aid, joins Steven Mercer to talk about how the pandemic is impacting financial aid awards, what to do if your family’s financial situation has changed, and how to plan for the future in uncertain times. [Show ID: 35963] More from: STEAM Channel (https://www.uctv.tv/steam) UCTV is the broadcast and online media platform of the University of California, featuring programming from its ten campuses, three national labs and affiliated research institutions. UCTV explores a broad spectrum of subjects for a general audience, including science, health and medicine, public affairs, humanities, arts and music, business, education, and agriculture. Launched in January 2000, UCTV embraces the core missions of the University of California — teaching, research, and public service – by providing quality, in-depth television far beyond the campus borders to inquisitive viewers around the world. (https://www.uctv.tv)

What No Student Loan Payments Until 2021 Means For You

You don’t have to make another federal student loan payment in 2020. Now is the time, though, to decide what to do before your bill arrives in January 2021.

Federal student loan borrowers were already in an automatic interest-free pause on payments as part of the original coronavirus relief bill, known as the CARES Act. This pause was expected to expire Sept. 30, but an extension of the forbearance through Dec. 31 was directed in a memorandum signed by President Donald Trump on Aug. 8.

However, it’s uncertain that all the student loan relief measures included in the original CARES Act, such as a pause on collection activities, will also continue.

“The language of the executive order is not clear,” says Betsy Mayotte, president and founder of The Institute of Student Loan Advisors. It’s also possible, she says, that Congress will make additional changes before the current automatic forbearance period ends.

For now, the forbearance extension is to begin Oct. 1 and run through the end of the year, barring any legal challenge. The Department of Education is expected to issue additional guidance in the coming days on the details of the memorandum.

Here’s what the student loan payment relief extension is likely to hold for you, depending on your situation:

YOU HAVE FEDERAL LOANS AND FACE FINANCIAL HARDSHIP

January 2021 is just a few short months away, but it’s enough time to make a change for your loan payments and avoid defaulting on your loans.

“There is no harm or downside in talking to your servicer now,” says Scott Buchanan, executive director of Student Loan Servicing Alliance, the trade association of student loan servicers. “You want to be well-prepared for whenever this does expire.”

If you know you’ll have difficulty repaying the debt, contact your servicer now about enrolling in an income-driven repayment, or IDR plan — it caps payments at a portion of your income and extends the repayment term. If you don’t have a job, your payment could be zero. If you’re already enrolled in IDR, make sure to recertify your income if it has changed.

YOU CAN STILL MAKE PAYMENTS ON YOUR FEDERAL LOANS

If your finances haven’t been affected by the economic downturn, you can use this time to prioritize financial goals.

Consider making payments toward your principal on your federal loans to lower your overall debt. Since your loans are on automatic forbearance, you’ll need to contact your servicer to do so.

Alternately, you can make a dent in other financial goals, such as paying down credit card debt or padding your emergency fund.

YOUR FEDERAL LOANS ARE IN DEFAULT OR REHABILITATION

All collection activities on federal student loans are suspended through Sept. 30, such as wage garnishment and collection calls. However, experts say, the new memorandum doesn’t specifically indicate that collections would be suspended through the end of the year.

Similarly, if you’re currently rehabilitating defaulted student loans, the original six months of nonpayment counted toward the nine needed to complete the process. But the memorandum doesn’t specify this would continue under the forbearance extension. Contact your servicer for more information.

YOU’RE PURSUING PUBLIC SERVICE LOAN FORGIVENESS

Federal student loan borrowers pursuing Public Service Loan Forgiveness don’t need to make payments until Sept. 30. Those months of nonpayment still count toward the 120 payments needed to qualify for PSLF as long as you’re still working full time for an eligible employer.

However, there is no indication yet that the new memorandum applies to borrowers pursuing PSLF, experts say. Contact your servicer to find out if the additional months of forbearance would count toward PSLF. If not, consider making payments during this time to keep on track.

YOU RECENTLY GRADUATED FROM COLLEGE

If you were expecting to start making payments on your loan within the period of extended forbearance, your first payment won’t be due until January. Usually, interest accrues during a grace period, but if your six-month grace period overlaps with the administrative forbearance period, interest won’t grow.

Use this time to find out who your servicer is and what your first bill will look like.

If you think you can’t make your minimum payment come January, you can apply for an income-driven repayment plan to cap payments at a portion of your income (it could be zero if you don’t have a job). Apply for income-driven repayment at least two months before repayment starts.

YOU’RE TAKING TIME OFF FROM SCHOOL

Federal loans typically have a grace period of six months after you leave school. If you have student loans and last attended school in the spring, your payments would start to come due this fall. The extended forbearance period would delay your first payment until January.

When you resume classes, you can defer payments until you finish school as long as you are enrolled at least half time. But student loans get only one grace period; you won’t have another after you graduate or leave school again.

YOU HAVE PRIVATE STUDENT LOANS

Your lender may offer private student loan relief in the form of a payment pause or reduced payments. While a number of lenders structured relief plans to end Sept. 30, many are open to an extension or additional relief.

Contact your lender to ask about additional deferments or payment reductions. You can also apply for existing loan modification programs for financial hardship. These will vary from lender to lender — but interest will continue to accrue, unlike with federal loans.

You’ll likely have to apply for private loan relief individually since most lenders aren’t making payment pauses or loan modifications automatic, Mayotte says.

YOU HAVE NON-GOVERNMENT OWNED FFEL LOANS OR PERKINS LOANS

Student loan borrowers with the Federal Family Education Loan (FFEL) Program or Federal Perkins loans not owned by the Education Department don’t have access to the automatic forbearance.

To take advantage of the forbearance, you’ll need to combine your loans into a federal direct consolidation loan. Consolidating loans will cause any unpaid interest to capitalize, or be added to the principal balance. Contact your loan servicer to determine how consolidation will affect the total repayment amount, interest rate and loan balance.

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This article was provided to The Associated Press by the personal finance website NerdWallet. Anna Helhoski is a writer at NerdWallet. Email: anna@nerdwallet.com.

RELATED LINKS:

NerdWallet: Income-Driven Repayment: Is It Right for You? https://bit.ly/nerdwallet-income-repayment

Department of Education https://studentaid.gov/announcements-events/coronavirus

More From AOL Associated Press:

By: ANNA HELHOSKI of NerdWallet

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NerdWallet 6.23K subscribers The CARES Act provided federal student loan borrowers with relief in the form of six months of interest-free paused payments, also known as forbearance, as well as a halt to all student loan collections. The forbearance was extended on August 8. If you have federal student loans, what does that mean for you? Should you continue to pay?

NerdWallet’s student loans expert, Anna Helhoski, provides guidance for those who should take advantage of forbearance and those who should continue to pay. She also shares tips on whether or not to refinance loans right now. What No Student Loan Payments Until 2021 Means for You: https://www.nerdwallet.com/article/lo… Federal Loans Are Paused Until 2021 — Should You Pay Anyway? https://www.nerdwallet.com/article/lo… Student Loan Refinance Calculator: https://www.nerdwallet.com/article/lo… Student Loan Forbearance: How It Works and Who May Benefit: https://www.nerdwallet.com/blog/loans… Private Student Loan Relief for Borrowers in the Coronavirus Crisis: https://www.nerdwallet.com/blog/loans… Subscribe to our channel and also follow us here: Facebook: https://facebook.com/nerdwallet Instagram: https://instagram.com/nerdwallet Twitter: https://twitter.com/nerdwallet

Investors Block 800,000 Student Loan Borrowers From Billions In Potential Relief

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Investors of a sprawling private student loan operation have effectively blocked a settlement proposal that could have provided billions of dollars in relief to 800,000 student loan borrowers.The case involves a set of financial vehicles collectively known as National Collegiate Student Loan Trusts. The National Collegiate Student Loan Trusts are not technically a student loan company (at least in the traditional sense), nor are they even a single organizational entity.

Rather, the name refers to around 15 or so individual trust entities that collectively acquired hundreds of thousands of private student loans that were originally disbursed by private commercial banking entities. These original lenders securitized and sold bundles of private student loans, which were then purchased and transferred by intermediaries, and then ultimately assigned to the National Collegiate Student Loan Trusts.

In 2017, the Consumer Financial Protection Bureau (CFPB) filed a lawsuit against the National Collegiate Student Loan Trusts and its servicer, TransWorld Systems for illegal collections practices. The lawsuit alleged that the trusts filed numerous collections lawsuits against consumers without complete documentation sufficient to prove that the trusts actually owned the loans they were purporting to collection.

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The lawsuit also alleged that the trusts relied on sworn affidavits by employees of TransWorld Systems to prove ownership of the student loans, but that at times, these affiants had no actual personal knowledge of the underlying debts at all. As a result, student loan borrowers wound up being forced, via state court judgments, to pay for student loans that they did not owe, or did not have to repay.

The CFPB and the National Collegiate Student Loan Trusts reached a settlement agreement that would have required the Trusts and TransWorld Systems to audit around 800,000 student loan accounts. Some expected that the audits would result in many of those accounts being deemed effectively uncollectible or even forgiven if the audits determined that sufficient documentation of ownership was unavailable.

A federal judge recently rejected the proposed settlement, however. The court sided with several investors and stakeholders involved with the National Collegiate Student Loan Trusts (including some banking entities and debt collectors), concluding that the attorneys acting on behalf of the trusts to negotiate with the CFPB did not have authority to enter into the settlement agreement in the first place.

The end result is that, barring a re-negotiated agreement or another favorable conclusion to the litigation, around 800,000 student loan borrowers with around $12 billion in student loans allegedly held by National Collegiate Student Loan Trusts will continue to be potentially liable for the debt. These borrowers could be subjected to a renewed wave of debt collection lawsuits, and it will be up to individual borrowers (and their attorneys) to fight these lawsuits in court, one by one.

Follow me on Twitter or LinkedIn. Check out my website.

Adam S. Minsky, Esq.

Adam S. Minsky, Esq.

I’m an attorney with a unique practice devoted entirely to helping student loan borrowers. I provide counsel, legal assistance, and direct advocacy for borrowers on a variety of student loan-related matters including repayment management, default resolution, and servicing troubleshooting. I have been interviewed by major national media outlets including The New York Times, NPR, and The Washington Post, and I’ve been named a Massachusetts Super Lawyer “Rising Star” every year since 2015. I regularly present to companies, schools, and professional associations about the latest developments in higher education financing, and I’ve published three handbooks to help student loan borrowers manage their debt. I’m also a contributing author to the National Consumer Law Center’s manual, Student Loan Law, as well as various law review articles. I received my undergraduate degree, with honors, in Philosophy and Political Science from Boston University, and my law degree from Northeastern University School of Law.

Source: https://www.forbes.com

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