Personal Finance

86-year-old grandmother got her nearly $32,000 student loan debt forgiven

Published

2 months ago

November 2, 2024

Business Finance News

Mrs | Moment | Getty Images

Rebecca Finch couldn’t think of a better gift for her 86th birthday.

She received a notice in early September from Navient that the lender would forgive the private student loan on which she was a co-signer.

“We’ve waived the remaining balance on your private student loan in the amount of $31,730.76,” the Aug. 29 letter said, in part.

Navient had determined that Rebecca qualified for its disability discharge. Rebecca received the news from the lender not long after CNBC wrote about the Finch family’s situation.

Rebecca Finch

Courtesy: Rebecca Finch

But the road to that relief was long, confusing and intensely stressful, said Rebecca’s daughter, Sabrina Finch.

“Finding out about the forgiveness option was very difficult,” said Sabrina, 53.

‘Transparency is severely lacking’

As the cost of higher education swells, the $130 billion private education loan industry has quickly grown. But private student loans come with few protections for those who run into repayment issues, including becoming disabled, consumer advocates say.

Only about half of the private lenders offer student borrowers the possibility of loan discharge if they become severely disabled and unable to work, according to an analysis by higher education expert Mark Kantrowitz.

In comparison, all federal student loans come with that option.

Even when a private student lender provides a disability discharge, it often doesn’t make the information widely known, advocates say.

“Transparency is severely lacking,” said Carolina Rodriguez, director of the Education Debt Consumer Assistance Program, or EDCAP, based in New York.

“It’s often difficult for borrowers to even reach a representative who is knowledgeable about the disability discharge option,” Rodriguez said.

Anna Anderson, a staff attorney at the National Consumer Law Center, has seen that play out as well.

“Even the borrowers who allegedly have access to it, it’s still very, very difficult for them to actually seek and receive a discharge,” Anderson said.

On Sept. 9, in the course of reporting on the Finch family’s story, CNBC asked Navient if it had a link to a disability discharge application on its website.

“No,” Paul Hartwick, vice president of corporate communications at Navient, wrote in an email the same day.

He sent a link to a page on the lender’s website that encourages struggling borrowers to reach out to learn of their options. By the time of publication, that link no longer worked. Hartwick explained that that was because a different company, Mohela, or the Missouri Higher Education Loan Authority, began servicing the private student debt owned by Navient in October. That portfolio includes around 2.5 million borrowers.

Hartwick directed CNBC to Mohela’s website, which contained similarly limited information about loan discharge opportunities for those with disabilities.

In response to a request for comment, a Mohela spokesperson pointed CNBC back to Navient.

“MOHELA is a service provider for private loans and does not determine the benefits available by lenders,” the spokesperson wrote in an email. “Program attributes and terms are defined by each lender/loan holder.”

For comparison, the U.S. Department of Education has an easy-to-access disability application for federal student loan borrowers, and detailed information on its website about documentation and eligibility requirements.

Around 13% of Americans report having a disability, according to Pew Research Center. People with a disability are much less likely to be employed than those without one, and unemployment rates are far higher for those with disabilities, the U.S. Department of Labor found.

Disabled mother and daughter, and a $31,000 debt

Most private student lenders require a co-signer who is equally legally and financially responsible for the debt. That’s because student borrowers tend to have a thin or nonexistent credit history.

Originally, Sabrina was the primary borrower of the Navient private student loan, and her mother, Rebecca, was the co-signer. Rebecca co-signed the loan in 2007 while Sabrina — then in her 30s — was in school to become a nurse.

In the 20 years that followed, both women developed serious health issues.

In 2023, Sabrina was approved for Social Security disability benefits due to her bipolar disorder, she said. Even though she could no longer work, she assumed she was still responsible for the Navient loan. She researched her relief options but couldn’t find any information.

Sabrina said she just kept describing her situation to multiple customer service representatives at Navient. For weeks, those conversations led nowhere — until one day, an agent mentioned the disability option.

The next headache was figuring out the proof she’d need to gather, Sabrina said.

She only learned what the requirements were a few weeks later when Navient mailed her documents outlining the needed materials. In the end, Sabrina said, she sent as much information as she could to the lender, including evidence from her doctors.

In May, Navient excused Sabrina from her private student loan.

But that news was bittersweet. Almost immediately, the lender transferred the loan to her then 85-year-old mother.

Sabrina said she had told Navient that Rebecca has serious health conditions of her own, including cardiovascular disease and constant pain from a fractured hip. Several strokes have left Rebecca with speech and cognitive issues, Sabrina said. Sabrina spoke with CNBC on her mother’s behalf, given Rebecca’s extensive medical issues.

Even so, Sabrina said, a customer service agent at Navient told her that it would be hard for Rebecca to receive a loan discharge.

“Navient said that she would probably not be excused, regardless of [the documents] submitted,” Sabrina said.

On Oct. 25, Hartwick declined to comment on that conversation, but said that the private student loan was “discharged in full for Rebecca once her disability information was processed.”

But there’s no question it’s incredibly difficult for co-signers to be forgiven from a private student loan, consumer advocates say. The Consumer Financial Protection Bureau found in 2015 that private student lenders rejected 90% of co-signer release applications.

Advocates say those odds haven’t improved.

“Based on my experience, co-signer release is virtually non-existent in practice,” EDCAP’s Rodriguez told CNBC in August.

Navient’s attempts earlier this year to collect the debt severely upset Rebecca, Sabrina said.

The women were most afraid the lender could sue Rebecca and get a lien on her house in Troutville, Virginia. Sabrina said one of the callers from Navient mentioned that possibility to her mother.

A spokesperson for Navient told CNBC on Aug. 8 that he couldn’t comment on whether the lender discussed the possibility of a lien on Rebecca’s house.

“But I can say, in general, private student loans do not go into collections until after a period of delinquency,” he said. “And, like other loans, there’s a process, often lengthy, to take legal action toward repayment.”

On July 26, Sabrina emailed Navient as much information as she could on her mother’s physical condition, sending copies to CNBC.

Around two weeks after CNBC published an article on the family’s experience, Navient informed Rebecca that the lender would release her from the debt.

It was a tremendous relief to her and her mother, Sabrina said.

But she remains angry at how difficult she found it to even learn about the disability discharge option.

“There has got to be great deal of people out there that are disabled and fighting to stay afloat with these loans,” Sabrina said. “And I assure you the lenders are not volunteering the options for loan forgiveness to those asking them for help.”

Personal Finance

1 million taxpayers to receive up to $1,400 in ‘special payments’

Published

2 hours ago

December 23, 2024

Business Finance News

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The IRS plans to issue automatic “special payments” of up to $1,400 to 1 million taxpayers starting later this month, the agency announced on Friday.

The payments will go to individuals who did not claim the 2021 Recovery Rebate Credit on their tax returns for that year and who are eligible for the money.

The Recovery Rebate Credit is a refundable tax credit provided to individuals who did not receive one or more economic impact payments — more popularly known as stimulus checks — that were sent by the federal government in the wake of the Covid-19 pandemic.

The maximum payment will be $1,400 per individual and will vary based on circumstances, according to the IRS. The agency will make an estimated total of about $2.4 billion in payments.

“Looking at our internal data, we realized that one million taxpayers overlooked claiming this complex credit when they were actually eligible,” IRS Commissioner Danny Werfel said in a statement. “To minimize headaches and get this money to eligible taxpayers, we’re making these payments automatic, meaning these people will not be required to go through the extensive process of filing an amended return to receive it.”

No action needed for eligible taxpayers

The new payments are slated to be sent out automatically in December. In most cases, the money should arrive by late January, according to the IRS.

Eligible taxpayers can expect to receive the money either by direct deposit or a paper check in the mail. They will also receive a separate letter notifying them about the payment.

Direct deposit payments will go to taxpayers who have current bank account information on file with the IRS.

If eligible individuals have closed their bank accounts since their 2023 tax returns, payments will be reissued by the IRS through paper checks to the mailing addresses on record. Those taxpayers do not need to take action, according to the agency.

How to tell if you qualify

The payments are only going to taxpayers who qualify for the 2021 Recovery Rebate Credit — particularly individuals who filed a 2021 tax return but who did not claim the Recovery Rebate Credit even though they were eligible, either by leaving that data field blank or entering $0.

Taxpayers who haven’t filed 2021 tax returns still have a chance to claim the credit. However, they must file by April 15, 2025, to claim the credit and any other refunds they are owed.

Claiming the Recovery Rebate Credit will not count as income and interfere with eligibility for certain other federal benefits, including Supplemental Security Income, or SSI; Supplemental Nutrition Assistance Program, or SNAP; Temporary Assistance for Needy Families, or TANF; and Special Supplemental Nutrition Program for Women, Infants and Children, or WIC.

The IRS provides more information on payment eligibility and amounts on its website.

Personal Finance

Why the ‘great resignation’ became the ‘great stay’: labor economists

Published

3 hours ago

December 23, 2024

Business Finance News

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The U.S. job market has undergone a dramatic transformation in recent years, from one characterized by record levels of employee turnover to one in which there is little churn.

In short, the “great resignation” of 2021 and 2022 has morphed into what some labor economists call the “great stay,” a job market with low levels of hiring, quits and layoffs.

“The turbulence of the pandemic-era labor market is increasingly in the rearview mirror,” said Julia Pollak, chief economist at ZipRecruiter.

How the job market has changed

Employers clamored to hire as the U.S. economy reopened from its Covid-fueled lull. Job openings rose to historic levels, unemployment fell to its lowest point since the late 1960s and wages grew at their fastest pace in decades as businesses competed for talent.

More than 50 million workers quit their jobs in 2022, breaking a record set just the year prior, attracted by better and ample job opportunities elsewhere.

The labor market has gradually cooled, however.

Coffee badging: A workplace trend that's annoying employers

The quits rate is “below what it was prior to the start of the pandemic, after reaching a feverish peak in 2022,” said Allison Shrivastava, an economist at job site Indeed.

Hiring has slowed to its lowest rate since 2013, excluding the early days of the pandemic. Yet, layoffs are still low by historical standards.

This dynamic — more people stay in their jobs amid low layoffs and unemployment — “point to employers holding on to their workforce along with more employees staying in their current jobs,” Shrivastava said.

Big causes for the great stay

Employer “scarring” is a primary driver of the so-called great stay, ZipRecruiter’s Pollak said.

Businesses are loath to lay off workers now after struggling to hire and retain workers just a few years ago.

But job openings have declined, reducing the number of quits, which is a barometer of worker confidence in being able to find a new gig. This dynamic is largely due to another factor: the U.S. Federal Reserve’s campaign between early 2022 and mid-2023 to raise interest rates to tame high inflation, Pollak said.

It became more expensive to borrow, leading businesses to pull back on expansion and new ventures, and in turn, reduce hiring, she said. The Fed started cutting interest rates in September, but signaled after its latest rate cut on Wednesday that it would move slower to reduce rates than previously forecast.

Overall, dynamics suggest a “stabilizing labor market, though one still shaped by the lessons of recent shocks,” said Indeed’s Shrivastava.

The great stay means Americans with a job have “unprecedented job security,” Pollak said.

But those looking for a job — including new college graduates and workers dissatisfied with their current role — will likely have a tough time finding a gig, Pollak said. She recommends they widen their search and perhaps try to learn new skills.

Personal Finance

Student loan forgiveness plans withdrawn by Biden administration

Published

4 hours ago

December 23, 2024

Business Finance News

U.S. President Joe Biden delivers remarks during the Tribal Nations Summit at the Department of the Interior in Washington, D.C., U.S., December 9, 2024.

Elizabeth Frantz | Reuters

The Biden administration has withdrawn two major plans to deliver student loan forgiveness.

The proposed regulations would have allowed the U.S. Department of Education secretary to cancel student loans for several groups of borrowers, including those who had been in repayment for decades and others experiencing financial hardship.

The combined policies could have reduced or eliminated the education debts of millions of Americans.

The Education department posted notices in the Federal Register last week that it was withdrawing the plans, weeks before President-elect Donald Trump enters the White House.

The Education department did not immediately respond to a request for comment.

“The Biden administration knew that the proposals for broad student loan forgiveness would have been thwarted by the Trump administration,” said higher education expert Mark Kantrowitz.

Trump is a vocal critic of student loan forgiveness, and on the campaign trail he called President Joe Biden’s efforts “vile” and “not even legal.”

Biden’s latest plans became known as a kind of “Plan B” after the Supreme Court in June 2023 struck down his first major effort to clear people’s student loans.

Consumer advocates expressed disappointment and concern about the reversal on debt relief.

“President Biden’s proposals would have freed millions from the crushing weight of the student debt crisis and unlocked economic mobility for millions more workers and families,” Persis Yu, deputy executive director and managing counsel of the Student Borrower Protection Center, said in a statement.

Student loan forgiveness still available

“There are so many borrowers concerned about the impact on the new administration with their student loans,” said Elaine Rubin, director of corporate communications at Edvisors, which helps students navigate college costs and borrowing.

For now, the Education department still offers a wide range of student loan forgiveness programs, including Public Service Loan Forgiveness and Teacher Loan Forgiveness, experts pointed out.

PSLF allows certain not-for-profit and government employees to have their federal student loans cleared after 10 years of on-time payments. Under TLF, those who teach full-time for five consecutive academic years in a low-income school or educational service agency can be eligible for loan forgiveness of up to $17,500.

The Biden administration announced Friday that it would forgive another $4.28 billion in student loan debt for 54,900 borrowers who work in public service through PSLF.

“Many borrowers are particularly concerned about the future of the PSLF program, which is written into law,” Rubin said. “Eliminating it would require an act of Congress.”

At Studentaid.gov, borrowers can search for more federal relief options that remain available.

Meanwhile, The Institute of Student Loan Advisors has a database of student loan forgiveness programs by state.