Tag Archives: Student loan

Fun with Phone Scams

It seems that telephone scams are alive and well even in this digital age.  Several times a week I’ll get a phone call (on my cell phone) from a number I don’t recognize.  Sometimes I don’t answer.  Sometimes I do.

Recently I decided to answer one of these calls and ended up listening to a computer voice tell me that this was my last chance to save money on my student loans before certain federal programs end.  Since my student loans have been paid off for a very long time, and I also happen to know more than a little about federal student aid programs (such as that no federal student aid programs are currently scheduled to end), I decided that I would try to have a little fun.

The computer voice told me to press 5 if I knew my FSA ID or 8 if I needed help retrieving it.  So this was a cue to me that the mission of this scammer was likely to get my FSA ID and use that to retrieve other private information about me (like my Social Security number and birth date).  I pressed 5 and then was put on hold for a minute or so.  This seemed weird since I was on the receiving end of the phone call.  But I held.  I wanted to play.  Eventually I was greeted by someone who asked if I was having trouble making my student loan payments.  I said that no, that wasn’t really a problem, and then they promptly hung up.  But much to my delight, they called back just a few minutes later, so the game could continue.  I pressed 5 and waited my turn again.  And this time the voice on the other end asked me if I had student loans.  I said that I assumed they knew I did, since they had called me about this issue.  Again…a hang up.

The student loan people have not called me back since that day.  My game wasn’t much fun.  I’ve had financial aid administrator friends keeps folks like this on the line for up to half an hour.  My experience pales by comparison.  But the message was received.  Phone scammers are out there, disguised as student loan consolidators.  Beware if you get a call from these folks.  They are not trying to help you.  And if you do have questions or concerns about your student loans, your answers are best found with either your loan servicer or your friendly neighborhood Financial Aid Director in suite 105 of the Katz Building.  And never give out any personal information on a telephone call you did not initiate.

 

The Latest News from Capitol Hill for Law Students

 

While law students were hunkering down over the weekend studying for exams, the eyes of the rest of the country were on Washington, D.C..  Let me catch you up on the pertinent info for law students.

First, the Senate passed their version of tax reform.  There are several differences between the House and Senate tax bills, so now both chambers need to sit down and hammer out the differences to decide what the final version (which will then go to the President for approval) will look like.  Without getting political or partisan, the most pertinent issue for law students is the elimination of the above the line deduction for student loan interest.  For several years student loan borrowers have been able to deduct up to $2,500 per year in student loan interest paid, without having to itemize deductions.  This deduction is wiped away in both the House and Senate versions, so it’s pretty safe to say this one is going to be gone.  The next most pertinent thing is the education tax credits.  Law students are able to take up to $2,000 a year from the Lifetime Learning tax credit for tuition and fees paid.  The House bill eliminates this credit, but the Senate bill does not.  So we’ll have to wait and see how that one plays out.  And finally there is the taxability of tuition waivers, which is less pertinent to law students, but a very big deal to many other graduate programs.  The House bill proposes that tuition waivers (such as those offered to grad students with assistantships) will count as taxable income.  This is also not in the Senate version, so I am hopeful that grad students throughout the country will be spared this burden.  (But don’t worry about scholarship and grant funds—these are taxed differently than waivers and will not be affected.)

Meanwhile, while the Senate was talking tax reform, the House introduced a bill specifically for higher education student aid reauthorization.  And it scares me.  There are a few things I like about the bill.  For starters, it would do away with student loan origination fees.  And it would also provide for more intensive student loan counseling.  But that’s pretty much where my happiness ends.  Here are some of the proposed changes that could affect future law students:

  • Graduate student annual federal loan limit of $28,500
  • Aggregate grad federal student loan limit of $150,000
  • The multitude of income driven payment options that we have now replaced by only one plan that would not allow for forgiveness after a certain number of years (only after the full amount of principal and interest is repaid in full).
  • The end of Public Service Loan Forgiveness
  • No more work study for graduate students

This bill is, of course, just the starting point.  The House will be talking about it and marking it up more in the coming weeks.  And then the Senate has to come up with their version, and then the whole reconciliation of the two different bills has to happen.  So it’s likely that this will not all come to pass…this is the lowball offer that we’re starting with, so there will be plenty of room for negotiation going forward.

Now is the time when the constituents come into play.  If you have an opinion on any of this proposed legislation, you have the right (and duty) as an American to make your Representatives and Senators hear your voice.

It’s been a busy few days in D.C..  And it definitely looks like lots of interesting (and sort of scary) stuff is coming down the pipeline.  Feel free to reach out if you would like to discuss any of it with me.

And good luck on exams!

Student Loan Origination Fees: Up, Up? Or Away?

I hate federal student loan origination fees.  They’re like a hidden tax on students.  And they’re made worse by the fact that they are now tied to the federal sequester budget cuts.  Before the sequester, these fees for graduate students were 1.0% on the Federal Direct Unsubsidized Stafford Loan and 4.0% on the Graduate PLUS Loan.  As a result of the sequester, these fees went up to 1.051% and 4.204%.  And then 1.072% and 4.288%.  And now, as of October 1, 2014, 1.073% and 4.292%.  And if Congress never votes to end the sequester cuts (or to address origination fees in some other way), these rates will continue to rise once or twice a year indefinitely.

I think the thing that irks me most about origination fees is the fact that they exist at all.  These fees were first added to these loans back in the 1980’s, intended to be a temporary cost saving measure.  Now here we are, decades later, and these “temporary” fees are an ongoing cash cow for the federal government.  For example, a law student who borrows a Grad PLUS Loan of $20,000 for the year will be charged an $858 origination fee on that loan.  That’s not exactly small change….that’s a month’s rent (or more)!

Origination fees are deducted up front from student loans before the funds disburse to the school.  This means that when a student asks for a certain amount of loan funds, they actually receive less than that amount.  Origination fees really aren’t very transparent.  Even if the student knows about them up front (which they should), the reality of the reduction doesn’t really hit home until the student sees that lower amount arrive…and they realize that they have to pay back the fee that was deducted.  With  interest.  Even though they didn’t get to use that money.  Seems to me that it’s a poorly designed, not very transparent tax on students who have limited or no income.

For years the National Association of Student Financial Aid Administrators (NASFAA) has been pushing for the elimination of these fees.  And finally there is a glimmer of hope that Congress might be listening.  Rep. Susan Davis from California has brought to the House a bill to eliminate these origination fees.  Finally!  I don’t have any illusions that this bill is actually going to pass in the upcoming lame duck session, but the fact that Congress is even talking about this issue is good news to me.  And hopefully it will eventually bring good news to all student loan borrowers.