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

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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.

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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.”

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Personal Finance

Will you have a lower tax rate in retirement? Maybe not, advisors say

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Most Americans will have a lower tax burden in retirement than during their working years.

However, that may not be the case for some retirees, especially for higher earners and big savers, which could have a significant impact on their financial plans, according to financial advisors.

“Substantial evidence” suggests retirees have lower tax rates than during their working years, according to a 2024 paper published by the Center for Retirement Research at Boston College.

There are a few general reasons for this, according to a joint 2017 research paper by the Internal Revenue Service and Investment Company Institute: People who leave the workforce no longer pay payroll taxes. Their household income often drops, generally meaning less income is taxed. And Social Security recipients only pay tax on a portion of their benefits.

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The “overwhelming majority” of people will have a lower tax rate in retirement, “hands down,” said Jeffrey Levine, a certified financial planner and certified public accountant based in St. Louis and chief planning officer at Buckingham Wealth Partners.

But that’s not always the case.

Required minimum distributions may be large

Those who’ve built up a sizable nest egg, perhaps with disciplined saving in a 401(k) plan or individual retirement accounts, may have large required minimum distributions, Levine said.

For example, the IRS requires that older investors take minimum withdrawals annually from “traditional” (i.e., pre-tax) retirement accounts when they reach a certain age. (It’s age 73 for those who turned 72 after Dec. 31, 2022.)

The total amount is based on an IRS formula. A bigger nest egg generally corresponds to a larger RMD.

This matters because RMDs from pre-tax accounts add to a household’s taxable income, thereby raising its total tax bill. By contrast, distributions from Roth accounts aren’t taxable, with some exceptions.

Investors held $11.4 trillion in traditional IRAs in 2023, about eight times more than the $1.4 trillion in Roth IRAs, according to the Investment Company Institute.

Additionally, investors who inherited a retirement account, perhaps from a parent, may have to empty the account within 10 years of the owner’s death, Levine said. Such withdrawals from a pre-tax account would further add to taxable income.  

Retirees may not want to shrink their lifestyle

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“Most clients we sit down with today don’t want to see a diminished amount of income when they retire,” Jenkin said. “They still want to take the same level of trips, level of going out to concerts and dining, taking care of grandchildren, and many are still carrying a mortgage into retirement.”

In the first three to five years of retirement, Jenkin actually finds clients generally spend more than they do during their working years due to what he calls “a period of jubilation.”

“A lot of people just don’t want to shrink their lifestyle,” he said.

Consider your income tax assumptions

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Personal Finance

Higher capital gains taxes unlikely under Trump, Republican Congress

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Former U.S. President and Republican presidential candidate Donald Trump speaks during an election night event at the West Palm Beach Convention Center on Nov. 6, 2024.

Jim Watson | Afp | Getty Images

President-elect Donald Trump‘s victory means higher individual taxes, including levies on investments, are less likely for top earners, experts say.

Vice President Kamala Harris proposed higher long-term capital gains tax rates during her campaign — raising the top rate to 28% from 20% — for those making more than $1 million annually. Long-term capital gains rates apply to assets owned for more than one year.

Harris’ plan veered from President Joe Biden‘s 2025 fiscal year budget, which called for 39.6% long-term capital gains taxes on the same top earners. 

Higher capital gains tax rates, however, are “entirely off the table,” under a Trump presidency and Republican-controlled Congress, said Erica York, senior economist and research manager with the Tax Foundation’s Center for Federal Tax Policy. 

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Republicans secured control of the Senate on Tuesday and could maintain a narrow majority in the House of Representatives, which creates a “trifecta” in the White House and both chambers of Congress.

Even with partial Republican control, “it’s most likely that capital gains tax policy just stays put where it is,” York explained.

For 2024, investors pay long-term capital gains rates of 0%, 15% or 20%, depending on taxable income. Assets owned for one year or less are subject to regular income taxes.

You calculate taxable income by subtracting the greater of the standard or itemized deductions from your adjusted gross income. The taxable income thresholds will increase in 2025.

Changes to ‘net investment income tax’

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Federal Reserve cuts rates after election. What that means for you

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The Federal Reserve Building in Washington, D.C.

Joshua Roberts | Reuters

The Federal Reserve announced it will lower its benchmark rate by a quarter point, or 25 basis points, days after President-elect Donald Trump won the 2024 election.

Economic uncertainty was a prevailing mood heading into Election Day after a prolonged period of high inflation left many Americans struggling to afford the cost of living.

But recent economic data indicates that inflation is falling back toward the Fed’s 2% target, which paved the way for the central bank to trim rates this fall. Thursday’s cut is the second, following a half point reduction on Sept. 18.

The federal funds rate sets overnight borrowing costs for banks but also influences consumer borrowing costs.

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Since the central bank last met, the personal consumption expenditures price index — the Fed’s preferred inflation gauge — showed a rise of just 2.1% year over year

Even though the central bank operates independently of the White House, Trump has been lobbying for the Fed to bring rates down.

For consumers struggling under the weight of high borrowing costs after a string of 11 rate increases between March 2022 and July 2023, this move comes as good news — although it may still be a while before lower rates noticeably impact household budgets.

“The Fed raised rates from the equivalent of the ground floor to the 53rd floor of a skyscraper, now they are on the 47th floor and another rate cut will take us to the 45th floor — the view is not a whole lot different,” said Greg McBride, chief financial analyst at Bankrate.com.

From credit cards and mortgage rates to auto loans and savings accounts, here’s a look at how a Fed rate cut could begin to impact your finances in the months ahead.

Credit cards

Since most credit cards have a variable rate, there’s a direct connection to the Fed’s benchmark. Because of the central bank’s rate hike cycle, the average credit card rate rose from 16.34% in March 2022 to more than 20% today — near an all-time high.

Annual percentage rates have already started to come down with the Fed’s first rate cut, but not by much.

“Still, these are sky-high rates,” said Matt Schulz, LendingTree’s credit analyst. “While they’ll almost certainly continue to fall in coming months, no one should expect dramatically reduced credit card bills anytime soon.”

Rather than wait for small APR adjustments in the months ahead, the best move for those with credit card debt is to shop around for a better rate, ask your issuer for a lower rate on your current card or snag to a 0% balance transfer offer, he said.

“Another rate cut doesn’t change the fact that the best thing people can do to lower interest rates is to take matters into their own hands.”

On the campaign trail, Trump proposed capping credit card interest rates at 10%, but that type of measure would also have to get through Congress and survive challenges from the banking industry.

Auto loans

Even though auto loans are fixed, higher vehicle prices and high borrowing costs have become “increasingly difficult to manage,” according to Jessica Caldwell, Edmunds’ head of insights.

“Amid this economic strain, it’s clear that President Trump’s promises of financial relief resonated with voters across the country,” she said.

The average rate on a five-year new car loan is now around 7%, up from 4% when the Fed started raising rates, according to Edmunds. However, rate cuts from the Fed will take some of the edge off the rising cost of financing a car — likely bringing rates below 7% — helped in part by competition between lenders and more incentives in the market.

“As Americans seek a reprieve from the relentless pressures on their wallets, even a modest federal rate cut would be seen as a positive step in the right direction,” Caldwell said.

Trump has supported making the interest paid on car loans fully tax deductible, which would also have to go through Congress.

Mortgage rates

Housing affordability has been a major issue due in part to a sharp rise in mortgage rates since the pandemic.

Trump has said he’ll bring down mortgage rates — even though 15- and 30-year mortgage rates are fixed, and tied to Treasury yields and the economy. Trump’s victory even spurred a rise in in the U.S. 10-year Treasury yield, sending mortgage rates higher.

Cuts in the Fed’s target interest rate could, however, provide some downward pressure.

“Continued rate cuts could begin to drive down mortgage rates which have remained stubbornly high,” said Michele Raneri, vice president of U.S. research and consulting at TransUnion. As of the week ending Nov. 1, the average rate for a 30-year, fixed-rate mortgage is 6.81%, according to the Mortgage Bankers Association.

Mortgage rates are unlikely to fall significantly, given the current climate, explained Jacob Channel, senior economist at LendingTree.

“As long as investors remain worried about what the future may bring, Treasury yields, and, by extension, mortgage rates are going to have a tough time falling and staying down,” Channel said.

Student loans

Student loan borrowers will get less relief from rate cuts. Federal student loan rates are fixed, so most borrowers won’t be immediately affected. (Efforts to forgive student debt are now likely off the table.)

However, if you have a private loan, those loans may be fixed or have a variable rate tied to the Treasury bill or other rates. As the Fed cuts interest rates, the rates on those private student loans will come down over a one- or three-month period, depending on the benchmark, according to higher education expert Mark Kantrowitz.

Still, a quarter-point cut will only cut monthly payments on variable-rate loans by “about $1 to $1.25 a month for each $10,000 in debt,” Kantrowitz calculated.

Eventually, borrowers with existing variable-rate private student loans may be able to refinance into a less expensive fixed-rate loan, he said. But refinancing a federal loan into a private student loan will forgo the safety nets that come with federal loans, such as deferments, forbearances, income-driven repayment and loan forgiveness and discharge options.

Additionally, extending the term of the loan means you ultimately will pay more interest on the balance.

Savings rates

While the central bank has no direct influence on deposit rates, the yields tend to be correlated to changes in the target federal funds rate.

As a result of Fed rate hikes, top-yielding online savings account rates have made significant moves and are still paying more than 5% — the most savers have been able to earn in nearly two decades — up from around 1% in 2022, according to Bankrate.

“Yes, interest earnings on savings accounts, money markets, and certificates of deposit will come down, but the most competitive yields still handily outpace inflation,” McBride said.

One-year CDs are now averaging 1.76% but top-yielding CD rates pay more than 4.5%, according to Bankrate, nearly as good as a high-yield savings account.

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