Student Loan Debt with Danielle Demming

Transcript

Over the next half hour Mark Jump, one of central Ohio’s leading debt resolution attorneys, will present information that will help protect you, eliminate debt and change your life. If you’re ready to take control of your financial situation, this program is for you.

Welcome Columbus to Legal Debt Solutions. I am your host, attorney Mark Jump. I and my law firm Jump Legal Group have been helping individuals and families finding their way out of debt for over 20 years here in central Ohio.

Happy Sunday, we’re so happy that you’ve joined us. If you’re at home having a cup of coffee, or perhaps driving around and beginning to run some of your Sunday errands, or perhaps you’re on your way to or from church and you found us on the dial and you or a loved one finds himself in financial difficulty, you have found the right show. We look forward to speaking with you this morning and hopefully we can provide some information that you think is helpful.

If you’re an individual out there that views themselves as a good American, a model citizen, you’ve always played by the rules, and unfortunately, very unfortunately you find yourself in a position right now that you never in a million years thought that you would be in. You have debt, you have maybe too much debt, you need information, you need knowledge, you need courage, and perhaps most importantly, you need solutions.

That’s why we call this show Legal Debt Solutions. We want to offer you a chance to resolve your debts with dignity so you can sleep at night. You can take care of yourself and your family. You can get up in the morning, go to work and not be stressed out about the debts that you don’t have a solution for.

Contact us for Information or Solutions

The information is what’s going to lead to the knowledge that you need and that’s going to give you a peace of mind and that is so hard to find if you’re in financial trouble.

And I understand that, my lawyers understand that and my staff understands that because over the past 20 years, we’ve helped thousands of people literally change their life by finding a solution to their financial problems. So if you’re out there and you find yourself struggling to pay your bills we hope very much that you can help us. You can always call our office, even though it’s Sunday morning, you can still reach us at (614) 481-4480. You can also reach us online at Jumplegal.com. You can reach us of course 24/7 online. And if you’d like to schedule either a telephone or office conference with one of our lawyers, not a staff member, one of our lawyers, you can do that online at any point in time.

We look forward to the opportunity to talk with you and hopefully we can help. A lot of times folks are a little apprehensive about coming in to see a lawyer and I understand that because for most of us, we don’t really need to go see a lawyer until something goes wrong in our life. And if you’re out there and you’ve never had to go see a lawyer before and you’re not in a situation that you think you need to have a lawyer, consider yourself blessed because many of us out there encounter life’s challenges. And in the area of financial troubles, we’d like to focus on that because we want to make you feel at ease when coming into our office.

So that’s why we offer a telephone conference if you’re unsure that you really want to come in and see a lawyer, or admittedly you might be a little nervous about seeing an attorney. Don’t hesitate to go ahead and schedule a telephone conference with one of our lawyers. We look forward to the opportunity to talk to you. And chances are we’ll be able to help you.

Imagine Life Without Debt

I mean just think about that for a second folks. No more calls day and night, over and over again, harassing phone conversations with collectors. No more sleepless nights, struggling through the next workday because you haven’t been able to get the sleep that you need because you’re so worried about your financial situation. Plus, realize that it may not be your fault that you’re in financial difficulty. I mean you didn’t head out into adulthood and say to yourself, “OK, I can’t wait to find myself in too much debt.” Something happened in your life, or a number of things happened in your life, that derailed you from your life’s path. We understand that and you shouldn’t beat yourself up over it.

What you need to do now is focus on getting a solution to your problems. And that’s what we’re here to provide for you. We want this show to be an inspiration for you to finally take action. We have an old saying in our office that we use a lot, “You can never finish something until you start.” And think about that, that’s so true. Until you’re ready to actually change your life, until you’re ready to actually take the first step and reach out and give us a call, you’re not going to be able to find a solution and get out of debt.

So don’t hesitate to contact us. Again our phone number is (614) 481-4480, and you can also reach us online at jumplegal.com.

Types of Debt and Your Options

And of course there’s a number of things that we provide in terms of services in our law firm, and we can’t cover all their services in each show because the show is only 30 minutes long. So what we do is we try to do what we call a deep dive into a specific type of service that we offer. We offer both bankruptcy under Chapter 7 and Chapter 13, and because of that we’re what’s called a “debt relief agency.”

And we also offer non bankruptcy solutions. So for instance you might be out there and you might be facing a foreclosure. You got behind on your mortgage payments for whatever combination of reasons and you’re having difficulty getting caught up, and you got far enough behind that your mortgage lender finally filed a lawsuit against you and that’s what’s called a foreclosure.

And when that happens you likely need an attorney but you may not necessarily need to file a bankruptcy. You might very well be able to defend the foreclosure through our office. We might be able to negotiate what’s called a mortgage loan modification agreement for you and that would be an example of a non bankruptcy solution. At the same time you might have too much credit card debt and you might find yourself having difficulty making your credit card debt payments but maybe that’s the only debt that’s giving you troubles.

It might be that you don’t necessarily need a bankruptcy in that instance either because we might be able to do what’s called a debt settlement where we can settle your credit card debt for a percentage on the dollar.

Background on Student Loan Debt

We’re not going to talk about foreclosures or credit card debt today. What we want to focus on today is student loans and what to do if you’ve got too much student loan debt. And if we have enough time, I want to talk about how Chapter 13 can help you with your student loan debt. But before that, I want to provide a review of some of the student loan debt solutions that are out there because a good part of our practice is dedicated to what we call student loan workouts, and we can do that both inside a bankruptcy and also outside of a bankruptcy.

It’s important for those of you out there that are struggling with student loan debt to understand what our options might be. And if you’re in student loan debt, understand you are definitely not alone.

Right now, there’s over $1 trillion of student loan debt out there. And it’s the fastest growing category of consumer debt out there. About five years ago it finally eclipsed credit card debt as the highest category of what we call unsecured consumer debt out there, and it continues to grow very rapidly. One of the reasons for this is because the cost of tuition has increased at such a rapid pace.

When you compare it to inflation and just general costs of living standards, it’s become more and more necessary for individuals and families that want to send their kids to college to figure out a way to finance. So it’s almost become part of our American fabric that everyone goes to college and because of that, that has contributed to individuals taking out student loans and a lot of folks have taken out perhaps too much in student loans because they didn’t recognize when they took up the debt in the first place how difficult it might be when it came time to pay it back.

And for those of you that recently got out of school, you know what that’s like. You get out of school, and you get that first letter in the mail, and you open it up and you read what your first payment is going to be, and you think to yourself “‘Oh my God am I really going to be able to do that?”

Now, fortunately this morning we have one of our lawyers with us and we’re going to come back from a break in just a little bit.

Insight from Danielle Demming

We have with us this morning Danielle Demming, who is an attorney at my law firm, Jump Legal Group, and she’s a recent graduate of law school within the last five years and her sweet spot is student loan workouts. So, she’s joining us this morning because I want to have an opportunity to ask her a few questions and have her share with you some of her knowledge and some of her experience as it relates to helping individuals find their way out of student loan debt.

Many times it does not require a bankruptcy proceeding; that’s the good news. The bad news is sometimes that depends on the type of student loan that you have that dictates what we can do or not do.

Mark:
Welcome back Columbus to Legal Debt Solutions. I am your host, attorney Mark Jump, and before the break I said that we were going to take a five minute break and I apologize about that folks. Our break is only about a minute and so hopefully you’re still there, or hopefully you’ve come back and you didn’t take me literally when I said five minutes. I just said that mistakenly. But welcome back. And before the break I was introducing one of our attorneys who’s joining us in the studio this morning. Her name is Danielle Demming. Good morning Danielle.

Danielle Demming:
Good morning.

Mark:
How are you?

Danielle:
I’m doing great.

Mark:
Thanks for joining us this morning.

Danielle:
I’m very excited to be here. Hello Columbus.

Mark:
So, Danielle focuses on student loan workouts at our firm and really began having a passion for that type of legal work based on her own personal experience. So I wanted to give her an opportunity to share that with all of you how she came about not only becoming familiar with the challenges of student loan debt but also understanding that there’s a lot of solutions out there that many folks are just not aware of.

So, Danielle if you could just take us through a little bit of your background and what it was like when you got out of law school and were first faced with “Oh my gosh you know, I got this first notice in the mail that I had to start making my student loan payments and you thought, ‘Well that’s probably not going to happen the way they want it to.’”

When You Receive Your Repayment Letter

Danielle:
Yes. So sure Mark when I graduated from law school, I had received my first student loan statement from my servicer with a 10 year repayment. And surprisingly my student loan payment was going to be over $2 thousand a month. Which at that point in time, I never paid $2 thousand on anyone single bill. And I was very nervous and scared as I’m sure a lot of students are out there who recently graduated and along with my letter there wasn’t any information enclosed on “What do you do if you can’t afford this payment?”

And that’s when I started to really freak out. So I started to research online and see what options were available to me. And that’s when I learned about some of the really great options that are available for folks who have federal student loans.

Mark:
And you’re very resourceful because of course you’re a lawyer right. So you might have had at your disposal some tools that a lot of individuals may not actually have.

Danielle:
Yeah I know that’s right. And actually that’s what led my passion and this is why I’m so passionate about helping other students because, you know I thought, “Wow this was actually a little bit challenging for me to figure out the right solution. I wonder what everyone else is doing out there?”

Mark:
Exactly. So you got this notice, you got your standard tenure repayment option, which by the way folks, everyone receives that; that’s the standard letter that you receive. So depending on the amount of your student loan debt, it can be a very high payment and of course for individuals that have gone to law school or medical school they’ve also gone before that to undergraduate school.

So depending on how much money you had to borrow to get all of your education, that’s going to dictate the amount of your monthly payment. So you got that notice. You did some research, and you came upon the same types of solutions that we offer for our clients, which are largely income-based repayment options. And, so maybe you can tell us a little bit about how those work.

Income-Based or Pay As You Earn Plans

Danielle:
Yeah sure. So there are a couple of different repayment options and they take that as a portion of your discretionary income. So there is the Income-Based repayment plan and then there is the Pay As You Go (Pay As You Earn – PAYE) repayment plan. Both of those are dependent upon when you actually graduated from undergraduate and when you actually incurred the loans. Really the only significance between those two – one is 15% of your discretionary income, and that’s the IBR plan – and the other one is only 10% of your discretionary income.

Mark:
And just for all of you to know, the Pay As You Go plan which Danielle was mentioning and some people call it the Pay As You Earn (PAYE) plan, that’s a relatively new plan and it only applies to those borrowers that hold no balance. They had no student loan balance before Oct. 1, 2008 and their student loan that they’re trying to get an income based repayment program for originated after Oct. 1, 2011.

So it’s a better program than the IPR in general, but it’s limited to that class of borrowers that fit within those dates. So it’s limited in that respect unfortunately, but it also depends on what individuals do for a living as to what options might be available. And for instance if you’re a teacher, or you work for 501C3, or you work for the government somehow, I think those clients that we meet with are the happiest when they learn what we’re able to do for them, and maybe you could outline how the the income-based repayment program works for those individuals that are qualified for what we call a public service loan forgiveness.

Danielle:
Yeah. So folks who qualify for that one, it’s really really amazing because they actually only have to pay like I had said a portion of their discretionary income each month for only 10 years. And then at the end of those 10 years, the entire loan balance is forgiven.

Mark:
That’s only 10 years folks. Think about that. I mean you might have a student loan that’s north of $100 thousand. And it may be, let’s just talk about simple arithmetic here, it may be that you work for the government and you’re only able to pay back, let’s say $15 thousand of that $100 thousand. Well, said another way you’re gonna be wiping out $85 thousand of your student loan debt.

Difference in Repayment Options

And the one thing that Danielle didn’t tell you, which is a very significant distinction, between the Public Service Loan Forgiveness program, and then the other two programs that apply to everybody which is the Pay As You Earn (PAYE)…well I guess that wouldn’t apply to everybody because we just mentioned that that depends on what your student loan balance was and when you took out your student loan and the IVR program…but the big difference between the Public Service Loan Forgiveness Program and the other IVR programs is that when it ends, the amount that’s not paid back is forgiven. Which means you don’t have to pay it.

And that’s similar between the programs but the Public Service Loan Forgiveness program doesn’t attach any kind of negative tax consequences to the amount that’s forgiven. So for instance, in our example there was $85 thousand that didn’t get paid. Well if it’s public service loan forgiveness, that’s not going to be taxable it’s not going to be imputed to you as debt forgiveness income. If you’re under just a regular old IVR then it is. Now of course if you’re under an IPR then that’s going to be 20 – 25 years down the road and you don’t know what your particular overall income situation is going to be at that particular point in time. So, we’re speculating a little bit but that is a significant difference between the programs that’s important for everybody to understand. And one of the things that we’ll do for you at our law firm is to help you through the process.

So for instance if someone comes in and meets with you Danielle and has a student loan issue just generally what would you typically do with that particular client in terms of trying to understand what their situation is. How we might be able to help them?

Determine What Works for You

Danielle:
Yeah. So the first thing that I’m going to do is I’m going to try to figure out whether or not the loan is a private loan or a federal loan, and the way you can check that out is by going to the federal National Student Loan database, which is online so anyone all the listeners out there if you’re not sure whether you have a federal loan or a private loan, you can go to this website, log in and you create a login online. After I determine whether or not it’s a private loan or a federal loan. I review the family size and the income of the family.

Mark:
That’s exactly right and that’s a good starting point. The difference between federal and private loans we’re going to talk about in more detail after the break. And that’s when as I mentioned at the start of our show, if we had enough time which I think we’re going to, to talk about how Chapter 13 can help those of you with both federal and private loans but mostly private loans. We’re going to take a very short break folks and we’ll be right back.

Welcome back Columbus to Legal Debt Solutions. I’m your host, attorney Mark Jump. We are talking about student loan debt this morning and what to do about it if you’re in a situation where you’ve received that first notice after you’ve graduated from either college or law school or medical school and you’ve opened it up and they’ve given you the standard 10 year repayment program and you look at that payment and you think OK that’s not going to happen and you put that notice down and you think “Oh my gosh, what am I going to do next?”

And before the break we were talking to one of our attorneys at Jump Legal Group, Danielle Demming, who is in studio with us this morning and she was walking us through how we typically handle student loan intake and some of the information that she likes to receive from clients, the questions that she asks, when she was in the middle of describing that during the breaks. So I’m going to let her finish the thought that she was on. You were talking about what a client can expect to leave with after we’ve done that initial intake if they’ve got too much student loan debt.

What to Claim on Taxes

Danielle:
Yes. So once we determine what type of loan they have and assuming that they have a federal loan as we’ve been talking about this morning, I go ahead and I take a look at their family size and their income level and then it also depends actually if you’re married on how you file your tax returns. So one thing I will counsel my clients on is, ‘OK does it make sense the following tax year to maybe file separately?’ And you may be thinking, “Well why would I want to do that if I’m getting benefits and I by claiming my spouse?”

Well sometimes those benefits don’t exceed the benefit that you’ll get by having a reduced income-based student loan payment plan which is something we also take in consideration at our office.

Mark:
Exactly. That’s a great point because if you file separately you don’t have to count your spouse’s income.

Danielle:
Right. Which is amazing because then you know remember we talked about that for IVR and the Pay As You Earn or pay as you go, it’s going to be based off of your discretionary income. So that’s going to significantly, you know if you have one spouse’s income at 10% versus two, that’s going to greatly affect the payment.

Mark:
That’s exactly right. You might not be able to achieve the same low payment if that if you have to include your spouse’s income in the analysis.

Private Loan Repayment Options

Now we talked a lot about federal student loans and private student loans. And the reason we’ve talked a lot about federal student loans is because there’s a lot of things that we can do for those of you out there that have federal student loans, both inside and outside of a bankruptcy. Unfortunately, if you’ve got a private loan, and in very briefly I’ll just describe the distinction of a federal student loan: is a student loan that’s issued or insured by the federal government. So it’s from the U.S. Department of Education.

We in the practice call it ED. It doesn’t necessarily mean who your servicer is. For instance if your servicer is Navient, as an example they might be servicing meaning they’re the ones that send you the statements a federal loan or a private loan but a private loan is not issued by the federal government. It’s not guaranteed or insured by the federal government. It’s just a regular lender just like a credit card lender. And unfortunately there are no IVR programs if all you have is private student loans.

But, there is one solution that we’re able to provide a lot of folks that gives them a little bit of a reprieve, if you will, from some of the collection activity that goes on if you’re not able to make your student loan payment and you have just private loans. And it’s the same type of aggressive and many times harassing debt collection that you would face if you haven’t been able to pay your credit card for instance.

If these loan servicers are taking legal action against you, they might try to garnish your wages.
And, you might even be faced with legal action in the form of a lawsuit, you might be running the risk of having your wages garnished. So for those individuals we’d like to put them in what’s called a Chapter 13 repayment program that allows them to pay their student loans along with all the rest of their unsecured creditors at a very small percentage on the dollar and get protection from collection for as long as five years. Individuals find that tremendously helpful.

Folks you’ve listened to Legal Debt Solutions, have a great Sunday, Columbus. I am Mark Jump, your host. We’ll talk to you next week.

Outro:
This has been legal debt solutions with your host Mark Jump sponsored by Jump Legal Group. Legal Debt Solutions is your resource for debt resolution. Helping you eliminate debt and change your life. To schedule a free consultation, call (614) 481-4480.

Learn more about how we can help with your student loan debt repayment.

Read more about our featured Attorneys in this episode:
Mark Jump
Danielle Demming