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Millions of U.S. parents have taken out loans from the government to help their children pay for college, but now a crushing bill is coming due, the Wall Street Journal reported today. Hundreds of thousands have tumbled into delinquency and default. In the process, many have delayed retirement, put off health expenses and lost portions of Social Security checks and tax refunds to their lender, the federal government. Student loans made through parents come from an Education Department program called Parent Plus, which has loans outstanding to more than three million Americans. The problem is that the government asks almost nothing about its borrowers’ incomes, existing debts, savings, credit scores or ability to repay. Then it extends loans that are nearly impossible to extinguish in bankruptcy if borrowers fall on hard times. As of September 2015, more than 330,000 people, or 11 percent of borrowers, had gone at least a year without making a payment on a Parent Plus loan, according to the Government Accountability Office. That exceeds the default rate on U.S. mortgages at the peak of the housing crisis. More recent Education Department data show another 180,000 of the loans were at least a month delinquent as of May 2016. Read more. (Subscription required.) 

Now available in the ABI Bookstore: Pick up your copy of the updated and revised Graduating with Debt: Student Loans under the Bankruptcy Code, Second Edition! 

Want to find out more about the book? Watch this interview with Prof. Susan Hauser from last week’s ABI Annual Spring Meeting. 

The House Financial Services Committee will hold a hearing on Wednesday to examine the latest draft of the "Financial CHOICE Act of 2017.” The hearing, titled “A Legislative Proposal to Create Hope and Opportunity for Investors, Consumers, and Entrepreneurs,” will be examining the discussion the latest draft of the legislation sponsored by House Financial Services Committee Chairman Jeb Hensarling (R-Texas). Click here to view the witness list for the hearing. 

Click here to view the discussion draft of the "Financial CHOICE Act of 2017.” 

In recent years, private investment firms sold foreclosed homes on high-interest installment contracts to poor Cincinnati residents who could not get traditional bank mortgages, the New York Times reported today. Now, the city is cracking down, calling those who offer such deals “predatory” actors targeting the “unsuspecting and vulnerable.” In a sweeping lawsuit, Cincinnati took aim at one of the nation’s largest sellers of foreclosed homes, Harbour Portfolio Advisors, saying that the firm owes more than $360,000 in unpaid fines, fees and violation notices. The firm failed to properly maintain dozens of homes, the city claims, leading in one case to a child’s testing positive for lead poisoning.

New York State Attorney General Eric Schneiderman is warning seniors to be wary of new phone schemes demanding money through gift cards or pre-paid debit cards, the Associated Press reported yesterday. The attorney general's office released a consumer alert Thursday after an influx of complaints that scam artists posing as IRS agents or family members are defrauding elderly residents by requesting they buy gift cards and read the barcodes to scammers over the telephone. Schneiderman's office says residents should always be suspicious of strangers asking for money, even if they claim to be bank or credit card representatives. Schneiderman says that his office will work with the Retail Council of New York State, the American Association of Retired Persons, credit card companies and banks to protect and educate consumers about the new threat.

The Internal Revenue Service is about to start using four private debt-collection companies to chase down overdue payments from hundreds of thousands of people who owe money to the federal government, a job it has handled in-house for years, the New York Times reported today. Unlike IRS agents, who are not usually allowed to call delinquent taxpayers by telephone, the outside debt-collection agencies will have free rein to do so. Consumer watchdogs are fearful that some of the nation’s most vulnerable taxpayers will be harassed and that criminals will take advantage of the system by phoning people and impersonating IRS collectors. Additionally, one of the four companies that the IRS has hired, Pioneer Credit Recovery, a subsidiary of Navient, was effectively fired two years ago by the Education Department from its contract to collect delinquent debt for misleading borrowers about their loans at what the department called “unacceptably high rates.”