Personal Finance

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

Published

3 weeks ago

November 2, 2024

Business Finance News

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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.

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

Here’s why you should max out your health savings account

Published

19 hours ago

November 21, 2024

Business Finance News

Marco Vdm | E+ | Getty Images

Many employees have a health savings account, which offers tax incentives to save for medical expenses. However, most are still missing out on long-term HSA benefits, experts say.

Two-thirds of companies offer investment options for HSA contributions, up 60% from one year ago, according to a survey released in November by the Plan Sponsor Council of America, which polled more than 500 employers in the summer of 2024.

But only 18% of participants invest their HSA balance, down slightly from the previous year, the survey found.

That could be a “huge mistake” because HSAs are “the only triple-tax-free account in America,” said certified financial planner Ted Jenkin, founder and CEO of oXYGen Financial in Atlanta.

Health savings accounts are popular among advisors, who encourage clients to invest the funds long term rather than spending the funds on yearly medical expenses. But you need an eligible high-deductible health plan to make contributions.

Some 66% of employees picked an HSA-qualifying health plan when given the choice, according to the Plan Sponsor Council of America survey.

However, the best health insurance plan depends on your family’s expected medical expenses for the upcoming year, experts say. Typically, high-deductible plans have lower premiums but more upfront expenses.

HSAs can look like a ‘health 401(K)’

HSAs have three tax benefits. There’s an upfront deduction on contributions, tax-free growth and tax-free withdrawals for qualified medical expenses.

If you invest it wisely, it can look like a health 401(k).

Ted Jenkin

Founder and CEO of oXYGen Financial

“It’s one way to deal with the inflationary cost of health care,” said Jenkin, who is also a member of CNBC’s Financial Advisor Council. “If you invest it wisely, it can look like a health 401(k).”

A 65-year-old retiring today can expect to spend an average of $165,000 in health and medical expenses through retirement, up nearly 5% from 2023, according to a Fidelity report released in August.

That estimate doesn’t include the cost of long-term care, which can be significantly higher, depending on needs.

Why employees don’t use HSAs for long-term savings

There are a couple of reasons why most employees aren’t investing their HSA balances, according to Hattie Greenan, director of research and communications for the Plan Sponsor Council of America.

“I think there’s a lot of confusion about HSAs and [flexible spending accounts],” including how they work and how they’re different,” she said.

While both accounts offer tax benefits, your FSA balance typically must be spent yearly, whereas HSA funds can accumulate for multiple years. Plus, your HSA is portable, meaning you can take the balance when changing jobs.

However, many employees can’t afford to cover medical costs yearly while their HSA balance grows, Greenan said. “Ultimately, most participants still are using that HSA for current health care expenses.”

Personal Finance

73% of workers worry Social Security won’t be able to pay benefits

Published

19 hours ago

November 21, 2024

Business Finance News

Sporrer/Rupp | Image Source | Getty Images

Most Americans are concerned about what may happen to Social Security when its retirement trust fund crosses a projected 2033 depletion date, according to a new Bankrate survey.

Nearly three-quarters, 73%, of non-retired adults and 71% retired adults say they worry they won’t receive their benefits if the trust fund runs out. The October survey included 2,492 individuals.

Those worries loom large for older Americans who are not yet retired, according to the results. That includes 81% of working baby boomers and 82% of Gen Xers who are worried they may not receive their benefits at retirement age if the trust fund is depleted.

“Once someone’s actually staring at the prospect of the end of their full-time employment, the seriousness of the need to fund that part of their life comes into full view,” said Mark Hamrick, senior economic analyst at Bankrate.

Still, a majority of millennials and Gen Zers surveyed, at 69% and 62%, respectively, are similarly concerned.

Social Security relies on trust funds to supplement its monthly benefit payments that currently reach more than 72.5 million beneficiaries, including Supplemental Security Income beneficiaries.

While payroll taxes provide a steady stream of revenue into the program, the trust funds help to supplement benefit checks. Social Security’s actuaries project the fund the program relies on to pay retirement benefits will be depleted in 2033. At that time, an estimated 79% of those benefits will still be payable.

What financial advisors are telling clients now

Financial advisors say they frequently field questions from clients on Social Security’s future. And they often tell their clients it’s still best to wait to claim benefits, if possible.

Retirees can claim Social Security retirement benefits as early as age 62, though they take a permanent lifetime reduction. By waiting until full retirement age — generally from 66 to 67, depending on date of birth — individuals receive 100% of the benefits they’ve earned.

By delaying from full retirement age to as late as age 70, retirees stand to get an 8% annual boost to their benefits.

When talking with clients, George Gagliardi, a certified financial planner and founder of Coromandel Wealth Strategies in Lexington, Massachusetts, said he tells them Washington lawmakers are unlikely to leave Social Security’s solvency unaddressed by the trust fund depletion deadline.

But even if that does happen, it still makes sense to delay claiming Social Security benefits until 70, if possible, unless there is a critical situation where it makes sense to claim early, he said.

“My bottom line on the whole thing is, you don’t know how long you’re going to live,” Gagliardi said. “But basically, you want to bet on longevity.”

Experts say retirees need to be mindful of longevity risk — the potential that you will outlive your savings.

Social Security is “inflation indexed longevity insurance,” said CFP David Haas, owner of Cereus Financial Advisors in Franklin Lakes, New Jersey. Every year, benefits are automatically adjusted for inflation, a feature that would be difficult to match when purchasing an insurance product like an annuity.

“You really can’t get that from anywhere else,” Haas said.

Maximizing your Social Security benefits

While more than a quarter — 28% — of non-retired adults overall expect to be “very” reliant on Social Security in retirement, older individuals expect to be more dependent on the program, according to Bankrate. The survey found 69% of non-retired baby boomers and 56% of non-retired Gen Xers expect to rely on the program.

To avoid relying on Social Security for the bulk of your income in retirement, you need to save earlier and for longer, Haas said.

“You need to compound your savings over a longer period, and then you’ll be flexible,” Haas said.

To be sure, shoring up a long-term nest egg is not a top-ranked concern for many Americans now as many face cost-of-living challenges. A separate election Bankrate survey found the top three economic concerns now are inflation, health care costs and housing affordability.

Personal Finance

How Trump’s win was helped in part by young men’s financial struggles

Published

23 hours ago

November 21, 2024

Business Finance News

Voters stand in line at a local polling station in Washington, DC, on November 5, 2024. Americans cast their ballots in the presidential race between Republican nominee former President Donald Trump and Democratic nominee Vice President Kamala Harris, as well as multiple state elections that determine the balance of power in Congress. (Photo by Nicolas Economou/NurPhoto via Getty Images)

Nicolas Economou | Nurphoto | Getty Images

Going into election day, Americans were sharply divided. But the gender gap was among the most glaring splits, with more women backing Vice President Kamala Harris and a majority of men supporting President-elect Donald Trump.

Women favored Harris by an 8-point margin, with the vice president securing 53% support compared to Trump’s 45%. Men backed Trump by a 13-point margin, with 55% favoring Trump and 42% backing Harris — resulting in a 21-point gender divide, according to NBC News exit polls.

Trump gained massive support among men on economic issues, specifically, including Hispanic and Black voters who were feeling particularly pessimistic. Inflation was the top concern among voters overall, followed by the current state of the economy.

A factor that drove young men to the polls may have been perceived economic disparities, according to experts, which ultimately helped Trump win on Election Day.

“Men feel like there’s no pathway for economic mobility for them,” said Julia Pollak, chief economist at ZipRecruiter.

‘That is a huge, huge gap’

There is a growing disillusionment taking hold.

Men are steadily dropping out of the workforce, especially those between the ages 25 to 54, which are considered their prime working years.

A study by the Pew Research Center found that men who are not college-educated leave the workforce at higher rates than men who are. At the same time, fewer younger men have been enrolling in college over the past decade.

In 1995, both young men and women equally were likely to hold a bachelor’s degree, at 25%. Today, 47% of women of ages 25 to 34 in the U.S. have a bachelor’s degree, compared with 37% of men their age, also according to Pew.

“That is a huge, huge gap,” Pollak said.

Schools often tout a four-year degree as the ideal scenario. And in many areas, vocational programs and other alternative pathways “aren’t as widespread” as they used to be, Pollak said.

At the same time, some traditional blue-collar jobs that used to employ more non-college educated men declined due to automation and globalization, leading to job displacement and uncertainty about future employment prospects, experts say.

Altogether, you have a group who feel like they’re “being left behind,” Pollak said.

Brett House, an economics professor at Columbia Business School, agreed: “The great concern is that we are developing a pool of young men that are neither developing the additional skills [nor] education necessary to participate fully in the labor force,” he said — particularly in “former manufacturing industrial powerhouse states.”

These days, young men are more likely to be considered NEETs — neither in employment, education or in training — a cohort that has been hardest hit by globalization and the decline of manufacturing in this country, according to Richard Fry, a senior researcher at Pew.

“When you don’t get rewarded for working, you work less,” Fry recently told CNBC. “That is a basic tenet of labor economics.”

Men were more likely than women to say they believed the results of the election would impact their financial life in the short term, according to a separate survey by NEFE. Those voters largely favored Trump.

Those with less than a high school diploma and those with a two-year degree were also most likely to say their financial life will be impacted by the presidential election. NEFE polled 1,000 adults about their financial feelings in relation to the 2024 general election in October.

“It’s reasonable that many Americans were weighing their current financial well-being and prospects for the future while casting their votes this November,” said Billy Hensley, NEFE’s president and CEO. Hensley is also a member of the CNBC Global Financial Wellness Advisory Board.

Young women have ‘made huge gains’ in the workforce

Meanwhile, women have “made huge gains” in their education and careers and working as much, if not more, than their male counterparts, according to Ali Bustamante, an economist and director at the Roosevelt Institute.

Today, women are getting married and having children later, if at all, and are prioritizing their careers, Pollak said. They’re looking to the government to make that choice less difficult through universal child care and access to abortion, she said.

“There was a time when people were either mothers and wives, or spinsters who worked,” Pollak said. “Now women often are prioritizing the career person over the wife and mother.”

However, while the issue of reproductive rights became a major factor in the 2024 presidential race, it did not drive more women to vote. It also did not prove to be one of the most important issues facing the country among voters overall, exit polls showed.

“Trump’s message resonated with young men,” said Fatima Goss Graves, president of the National Women’s Law Center Action Fund. “The pain that people in this country has been feeling in terms of the economy is real.”

Still, other issues — such as paid leave, affordable housing, child care and equal pay — are also hugely important to families, she said.

“This was one election, but I think it would be a mistake to suggest that women will stop fighting in larger numbers either for reproductive freedom or the things they care about — we have work to do,” Graves said.