You Have Options!

Contact attorney D.J. Rausa and find out the best route to your student loan debt relief.

(619) 295-3322

Federal Student Loans

Federal Student Loan Repayment Options

Federal Student Loan Debt
Repayment Options

Based on the current state of affairs within the U.S. Department of Education, and under its current policies, there are several different repayment options for federal student loans. Please be aware these programs could be eliminated at any time.

My experience has clearly indicated that federal student loan servicers do a terrible job of explaining options to student loan borrowers. This leads to a tremendous amount of frustration and confusion. The key to the performance and management of student loans is to get the loans in the right place, in the right program, and make their management in line with household finances. Once the total student loan picture is clear, options can be explained without pressure and deception from the collector or servicer.

The current Balance Based Repayment Plans available to federal student loan borrowers are as follows:

  • Standard Repayment
  • Graduated Repayment
  • Extended Repayment
  • Graduated, Extended Repayment

The current Income Driven Repayment (IDR) Plans available to federal student loan borrowers are as follows:

  • Income-Based Repayment (IBR)
  • Revised Pay-As-You-Earn (REPAY)
  • Pay-As-You-Earn (PAY)
  • Income-Contingent Repayment (ICR)
  • Newsflash: Federal Student Loans
DeVos’ Tiered Relief for Defrauded Students
President Trump’s Education Secretary, Betsy DeVos, has rolled out a new policy of “Tiered Relief” in which defrauded students are compensated based on their earnings following completion of college programs.
New assistance for disabled veterans with their federal student loans.
Recent news from the U.S. Departments of Education (DOE) is long overdue — it has partnered with the Department of Veterans Affairs to make it easier for disabled veterans to have their federal student loans discharged.
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The Department of Education and its student loan servicers are kicking out some bankruptcy debtors from their income-driven repayment plans even if they are current on their student loan repayments.
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This part of the Obama Student Aid Bill of Rights, is directed at hundreds of thousands of borrowers who are permanently disabled and cannot work.
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The U.S. Department of Education announced, on March 25, 2016, that evidence uncovered in its ongoing investigation of Corinthian Colleges, Inc. indicates that students were defrauded at 91 former Corinthian campuses nationwide and that those students have a clear path to student loan forgiveness.
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The Federal Teacher Loan Forgiveness Program is offered to qualified teachers by the U.S. Department of Education.
Don't forget about, or neglect, your student loan obligations.

Beware
The Woodstock Effect

More than 40 years ago, students who were attending college had a host of social, political and environmental concerns — much like today. However, student loan issues had yet to become a multi-generational problem like they are today. Some students were so involved in the issues of the day that they completely forgot about the fact that they ever took out student loans. Some never paid on them, yet they remained due.

The reminder occurred when those who attended the concert at Woodstock and were involved in the culture of that era became eligible for Social Security benefits. They had worked all their lives, paid into the system, retired, and received the letter of entitlement indicating they would be receiving benefits. The first payment had been substantially reduced with a note that said, “Remember Woodstock? The student loan? Now it is time to repay it.”

A $1,500 student loan that was taken out long ago and never repaid became a $25,000 federal debt that was being offset by a reduction in the payment of a federal benefit. OUCH! This happens — my 60 + year old clients have lived it.

In circumstances like these, I assist clients in getting their student loans from nonperformance to performing status.

Federal Student Loan Debt
Balance-Based Repayment Plans

Standard Repayment

Under the standard repayment option, you pay your student loan over 10 years at a level payment. Your payments cover interest and principal, and the balance is paid in full at the end of 10 years. Obviously, if you are carrying a large balance, your monthly payment will be large as well.

Graduated Repayment

Under the graduated repayment option, you pay your student loan over 10 years. Your payments start off low, and increase every two years. Your balance is paid in full at the end of 10 years, but you'll end up paying more under this option than you would under the standard repayment plan because your payments likely won't start to cover the principal balance as quickly.

Extended Repayment

Under this option, you can extend your payments for a period of up to 25 years as long as you have more than $30,000 in outstanding direct loans or FFEL Program loans. Your monthly payments will be lower than under the 10-year Standard Plan or the Graduated Repayment Plan, but you’ll end up paying more in total.

Extended Graduated Repayment

As with the Extended Repayment option, you can stretch out payments for a period of up to 25 years as long as you have more than $30,000 in outstanding direct loans or FFEL Program loans. Payments start low and increase every 2 years, which means you'll pay far more over the life of the loan than any of the other plans.

Federal Student Loan Debt
Income-Driven Repayment Options

Income Driven Repayment (IBR)

Income-Based Repayment (IBR) is the most popular of the income-driven plans. Payments are set at 15% of your adjusted gross income (10% for newer borrowers) above a minimum threshold and adjust annually for up to 25 years (20 years for newer borrowers). The unpaid balance is wiped out at the end of the repayment period.

Married borrowers who file separate tax returns use only their income for calculation of payment amounts due. The minimum income threshold, which is calculated based on family size, will include your spouse even if you file separate tax returns.

All federal student loans are eligible for IBR except for Parent PLUS Loans and Direct Consolidation Loans that include a Parent PLUS Loan.

Revised Pay-As-You-Earn (REPAYE)

Revised Pay-As-You-Earn (REPAYE) sets payments at 10% of your adjusted gross income above a certain level and adjusts annually for up to 20 years (25 years if you owe student loans for graduate school). The unpaid balance is wiped out at the end of the repayment period.

Married borrowers who file separate tax returns use only their income for calculation of payment amounts due. The minimum income threshold, which is calculated based on family size, will include your spouse even if you file separate tax returns.

You must be a new borrower on or after Oct. 1, 2007, and must have received a disbursement of a direct loan on or after Oct. 1, 2011 to qualify. You must also have an adjusted gross income below a certain threshold to be able to enter REPAYE.

Only federal student loans issued under the direct loans program are eligible for REPAYE, with the exception of Parent PLUS Loans and Direct Consolidation Loans that include a Parent PLUS Loan.

Pay-As-You-Earn (PAYE)

Pay-As-You-Earn (PAYE) sets payments at 10% of your adjusted gross income above a certain level and adjusts annually for up to 20 years. The unpaid balance is wiped out at the end of the repayment period.

Married borrowers who file separate tax returns use only their income for calculation of payment amounts due. The minimum income threshold, which is calculated based on family size, will include your spouse even if you file separate tax returns.

You must be a new borrower on or after Oct. 1, 2007, and must have received a disbursement of a direct loan on or after Oct. 1, 2011 to qualify. You must also have an adjusted gross income below a certain threshold to be able to enter PAYE.

Only federal student loans issued under the direct loans program are eligible for PAYE, with the exception of Parent PLUS Loans and Direct Consolidation Loans that include a Parent PLUS Loan.

Income-Contingent Repayment (ICR)

Income-Contingent Repayment (ICR) is the original income-driven repayment plan. Your payments are calculated using a complex formula and adjust each year for a maximum period of 25 years. At the end of 25 years, your unpaid balance is wiped out.

Married borrowers who file separate tax returns use only their income for calculation of payment amounts due.

ICR isn't used very often, as other income-driven repayment plans result in lower payments. The only major benefit to ICR is that it is the only income-driven repayment plan that can be used for Parent PLUS Loans.

None of the federal student loan repayment plans apply to private student loans. Repayment options are subject to the policies of the private bank, servicer, collection agency or attorney. That is why it is so critical to identify, early on, which loans are federal and which are private.

What's the performance status of your federal student loan?

Federal Student Loan Debt
Performance Status

Many of my clients are often shocked at the outstanding balance of their student loans. After I have an opportunity to review essential information, I can explain why.

Performance

Performance of a student loan is when the loan is in good standing and normal payments are being made on a monthly basis, in full and on time. These payments may very well be $0 per month depending on what repayment plan the borrower is in. But the loan is still performing.

Nonperformance

When the loans are not performing, they are in default, forbearance or deferment. There are some exceptions to this.

When the loans are in a nonperformance status, the interest continues to grow because of interest capitalization. This means the interest that remains unpaid and accumulated is added to the principal of the loan, and the interest then begins to accumulate on the new balance. This is ugly.

This is why a student loan with a relatively small balance and low interest rate can balloon to a very large balance if the loan has been in a nonperforming status for a long time.

Just a Little Bit Behind
Delinquency

The loans are still performing, but the monthly payments were not made on time, not paid in full or a combination of both. If this occurs for several months and continues, the loans may then become nonperforming.

More Than a Bit Behind
Default

Federal student loans are considered in default after they have been delinquent for more than 270 days. Once this happens, the status becomes nonperforming, any IDR payment program is terminated and a host of nasty collection activities can take place, including:

  • The issuance of an Administrative Wage Garnishment (AWG)
  • The interception of a tax refund
  • The offset Social Security benefits or other federal benefits
  • The initiation of a collections lawsuit

At this juncture, nothing may happen. The loan could sit in default status for a long time, accumulating unpaid interest and racking up costs and fees for the default. See The Woodstock Effect.

Federal Student Loan Debt
Settling Your Loan

For federal student loans, there are few settlement opportunities. If you’re in default, the U.S. Department of Education explicitly allows debt collectors to settle your debt. But those settlements happen only if you're in default, and if the debt collector has no realistic chance of ever being able to collect any money from you.

In other words, you've got to have been in default for a long time. The Department of Education must have been unsuccessful in doing an administrative wage garnishment because you don't have a job, and tax refund offsets must have come up empty.

That's why federal student loan settlements aren't offered as the first option in collection negotiations, and debt collectors are instructed to discuss settlement as an option only after exhausting other negotiation opportunities.

When they are offered, the Department of Education allows three types of settlement options:

  • • Standard compromises, which involves either payment of the current principal and interest with a waiver of projected collection costs/fees, payment of at least the current principal and 50% of the interest, or payment of at least 90% of the current principal and interest balance.
  • • Discretionary compromises, which involve a payment of less than the standard compromise amount, but only with prior approval by the Department of Education. The collection agency can’t agree without backup documentation from you.
  • • Nonstandard compromises, which are offered to only a very limited number of student loan borrowers.

If your federal student loan settlement is approved, you’ll have to pay it by certified funds or credit card within 90 days of the date of approval.

You Have Options!

Contact attorneys Chris Bush and D.J. Rausa and find out the best route to your student loan debt relief.

(619) 295-3322

“The starting point on all student loan debt resolution plans is to obtain the Student Loan Report from the US Department of Education. This report is vital to answering any student loan question. I do not even comment on a client’s situation without having first reviewed this report.”
Here's how to obtain your NSLDS report.
D.J. Rausa, Esq., Student Loan Attorney

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Avvo has rated D.J. Rausa at 9.1 out of 10 — a superb level of performance. Clients, too, have consistently rate D.J.’s performance as 5-star.
D.J. Rausa has many 5-Star review on Yelp, the popular on line business and service review source.
"Attorney D.J. Rausa was great from the first consultation to the end! He explained everything very clearly so we knew exactly what to expect, was always accessible for questions and has a great response time. He helped me consolidate my student loans into a lower payment and helped my spouse get approximately $80k in private and federal student loans discharged! I would highly recommend calling him!"

California Student Loan Attorney

California Student Loan Lawyer D.J. Rausa

California Attorney D.J. Rausa has been an aggressive debt solution advocate for his clients in San Diego since 1993. He now specializes in Student Loan Debt Resolution and defense, and is nationally recognized as an expert in this developing area of Student Loan Law.

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Experienced Bankruptcy Litigator

California Bankruptcy and Student Loan Lawyer Chris Bush

San Diego Attorney Chris Bush is an experienced bankruptcy litigator and Student Loan Debt Resolution specialist. He can help you find the best solution to deal with your student loan debt burden.

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Beware:
Tax Issues on Student Loan Settlements

When you settle a debt for less than the amount owed, you may have a tax liability in the future. Before you settle any private student loan debt, make sure you seek the advice of a tax professional.

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