%1

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. 

More than 550,000 people have signed up for a federal program that promises to repay their remaining student loans after they work 10 years in a public service job. But now, some of those workers are left to wonder if the government will hold up its end of the bargain — or leave them stuck with thousands of dollars in debt that they thought would be eliminated, the New York Times reported today. In a legal filing submitted last week, the Education Department suggested that borrowers could not rely on the program’s administrator to say accurately whether they qualify for debt forgiveness. The thousands of approval letters that have been sent by the administrator, FedLoan Servicing, are not binding and can be rescinded at any time, the agency said. The filing adds to questions and concerns about the program just as the first potential beneficiaries reach the end of their 10-year commitment — and the clocks start ticking on the remainder of their debts. Read more. 

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!