Wednesday, October 17, 2018

NY Times: The Public Student Loan Forgiveness Rescue Hasn’t Gone Well So Far

By Ron Lieber

The program that public servants can use to have their federal student loans forgiven is such a quagmire for borrowers that Congress had to set up a relief program for the relief program.

So far, it’s not performing much better.

It has been nearly five months since the Department of Education released instructions for a $350 million pot of money that some public servants can use if they received bad information about the loan forgiveness program and ended up in the wrong type of repayment plan.

Tens of thousands of people have applied for the relief program. But so far, most have been rejected, and as of late last month, none among the few thousand who remain in the running have seen their debt balances go to zero.

In response to an inquiry led by Senator Tim Kaine, Democrat of Virginia, the department disclosed last week that 28,207 people had submitted requests as of Sept. 28 and that it had found 21,672 ineligible almost immediately. It then culled “approximately” half of the remaining 6,535 for other reasons. That leaves just over 3,000 applications still under consideration.

It can take up to six months or so to review these requests because of the complexity of both the forgiveness program and the relief fund application process. The Department of Education has shifted some staff to work more closely with the loan servicer that handles the forgiveness program.

The relief fund was created after it became clear that scores of teachers, social workers and other government and nonprofit employees had received bad information from their loan servicers about the forgiveness program’s complex terms. So far, fewer than 1 percent of applicants have had their loans discharged through the program, which got its start just over a decade ago but is only now having borrowers become eligible.

To qualify for tax-free loan forgiveness, borrowers need to make 120 on-time monthly payments (while working in an eligible public-service position), have the right kind of loan (some federal loans qualify while others do not) and be in the right kind of payment plan (the income-driven ones designed to help lower-income borrowers). I explained the process in more detail in an earlier column.

When it became clear in recent years that loan servicers had told public-servant borrowers that they were doing everything right even when they were in the wrong kind of loan or payment plan, pressure grew on elected officials to help borrowers who thought they were being meticulous only
to find that years of payments had not counted for forgiveness.

Enter the Temporary Expanded Public Service Loan Forgiveness initiative, which is a pool of $350 million designed to help borrowers who were in certain ineligible payment plans, often because their loan servicers specifically told them to use those plans or stay in them. The relief program comes with its own rules and restrictions, which I outlined in a previous article and are available on the Department of Education’s website.

Five months in, that website is no model of clarity.

For instance, one paragraph tells borrowers that they must submit a public service loan forgiveness application and wait to be rejected (for payments that were not in a qualifying payment plan) before being potentially eligible for relief. The very next paragraph, however, tells them that they do not need to wait before submitting a request under the temporary plan.

Jolie von Suhr, a psychologist in a state psychiatric hospital in Lakewood, Wash., who was in an ineligible payment plan for years before realizing she had a problem, said the site’s conflicting information left her both perplexed and afraid.

“It kind of sounds like you can submit them both at the same time, but I’m not sure,” she said. “I’m so anxious now about doing anything incorrectly that could get me booted out of consideration.”

In fact, you do not have to wait for a public service loan forgiveness denial in order to request consideration under the temporary expanded program. I asked if the department intended to clarify this on its site and received assurances that it “will continue to review communications to borrowers and will adjust them as appropriate.”

Some eligibility determinations are easier to make than others — rejecting people who have not made 120 payments or who were in an ineligible loan, for example. The Department of Education’s loan servicer often has a tougher time producing an accurate count of months of repayment.

Plus, it now has to account for a rule under the temporary program that applies to people who thought they were in the right kind of repayment plan but found out much later that they were not. They are eligible for the temporary program only if their most recently monthly payment and the
one they made 12 months before their application were higher than what they would have paid if they had been enrolled in a qualifying repayment plan. Yes, it’s complicated, and clearing this hurdle may require documentation.

The Education Department seems tired of bearing blame for all of this.

“We implement the programs Congress creates,” said the department’s press secretary, Liz Hill. She added that the forgiveness program and the temporary program were “poorly constructed programs, the rules of which are highly complex and difficult for students to navigate.”

“We are working to make it as straightforward as the rules allow,” Ms. Hill said.

Some borrower advocates are not surprised by the delays thus far.

“This is a new program in that we’re still in the first year or so of forgiveness applications,” said Betsy Mayotte, president of the Institute of Student Loan Advisors, a nonprofit adviser to debtors. “I have high hopes that the process will become more seamless and quicker over time.”

© 2018 The New York Times Company.  All rights reserved.

Monday, October 15, 2018

Business Insider: A 10-step plan to paying off student loan debt, from someone who repaid over $40,000



Student loan debt is a big financial burden for many people. In fact, Americans owe $1.5 trillion in student loan debt, according to data from the Federal Reserve.

While some may find themselves forced to defer or default on your student loans, it's better if you're able to come up with a system to pay them off — and within a modest time frame.

There are two primary reasons to pay down your student loan debt in a reasonable amount of time, Maizie Simpson, data and news editor at Credit Karma, told Business Insider via email.

"The first has to do with interest: The longer you draw out your repayment period, the more interest you'll end up paying," Simpson said. "The second reason is that the longer you have student loan debt, the longer you might put off big life decisions or making investments in your future, such as starting a family or contributing to a 401(k)."

When it comes to paying off your student loans, no matter how intimidating the debt amount is, making an actionable payment plan is key. Here, Elyssa Kirkham, a finance reporter and student loan expert for Student Loan Hero, who paid off a substantial amount of debt herself, took us through a 10-step plan for paying off your student loan debt.

1. Know what you owe

Kirkham said that the first step in repaying your debt is to know your debt, especially since you might have taken out several student loans with various lenders. "Many people avoid thinking about or looking at their student debt too closely for a simple reason: Student loans are a huge source of stress," she said.

She suggested using the National Student Loan Data System to find any federal student loans you took out while in college.

"You can also find both federal and private loans listed on your credit report, and check that you're making the proper payments on time each month," Kirkham said. "In addition, record the current balance and interest rate on each student loan."

2. Triage your student loan debt

If you are in danger of or already missing student loan payments, Kirkham advised that you try to triage them.

"First, switch federal student loans to an income-driven repayment plan to lower monthly payments," she said. "Then, apply for deferment or forbearance to pause payments if you hit a major financial setback, such as losing a job."

Many private student loan lenders also provide an option to defer payments, Kirkham said. "And keep in mind that unless you have Direct Subsidized Loans, deferred student debt will continue to accrue interest and your balance will increase."

3. Assess other financial considerations

Kirkham said to consider if other financial goals need attention before you can go gung-ho on student debt. "If you have other debt, like credit card balances, that are costing you more than your student loans are, it might be wise to pay these off first," she said.

4. Get — and keep — your living costs in check

Kirkham suggested that you keep your biggest monthly costs as low and affordable as you can.
"I got married right out of college, and my husband and I had borrowed over $40,000 to pay for our educations," she said. "We paid off my student loans right away — about $17,000 within three years of graduating — and we just paid off the remaining student loan balance in July 2018!"

She said that keeping her lifestyle in check was a huge factor that enabled her to pay off her student loans in a timely manner. "I chose more affordable apartments, for example, and shared a car with my husband for years to put off buying a second vehicle," she said.

Kirkham said to take a look at your own monthly spending and rework your budget. "Outline recurring expenses, be critical, and see if there are any you can cut out or trim down," she said. "For instance, can you keep just one of the three video streaming services you're subscribing to? Each dollar you trim from your expenses means an extra dollar you can use to pay off student loan debt."

5. Decide how much to put toward student loans

"Once you calculate your set expenses, look at how much is left over," Kirkham said. "This is your discretionary income — money that you are free to decide how and when to spend."

She says you should decide how much of your discretionary income you want to put toward making payments on your student loan debt. "It's best to set a firm dollar amount that you can pay each month," she said.

Kirkham said that although you feasibly could afford to put all of this toward your student loans, it's important to be realistic. "You want to create a spending plan you will actually stick to," she said. 

"Try to cut back on this optional spending without making yourself miserable. For example, I learned to DIY what I could: I cooked at home, worked out at home, and even learned to give myself a pretty great self-manicure."

6. Make extra student loan payments each month

Make additional student loan payments each month by setting up an automatic, extra payment to go through after each deposit, Kirkham said. "This puts your student debt goal first and keeps it on track, instead of putting it at the mercy of your spending habits."

However, she said to check your monthly statements to make sure your extra student loan payments are applied properly. "Some servicers will count them as advance payments instead of applying them to your principal, for example," she said.

7. Target high-interest student loans first with the debt avalanche method

You may be familiar with the debt avalanche method of paying off credit cards, in which you pay off the highest-interest card first. Well, the same goes for student loans.

"As you pay down this balance, this will also lower the amount of interest you're being charged each month, so your dollars are used to actually lower your principal and get you out of debt," Kirkham said. "If you pay off this first loan, you simply put the amount you were paying (including both the monthly payment and extra payments) toward the student loan with the next-highest interest rate."

8. Refinance certain student loans

Another way to target high-interest student loans could be to refinance them, Kirkham said.

"Private student loans and PLUS student loans, in particular, tend to have high enough interest rates that it could make sense to refinance," she said. "You'll need to be well-qualified, but taking this step could help you replace your high-interest student debt with a new private student loan at a lower interest rate."

9. Put any windfalls or raises toward your student debt

Kirkham suggested looking for "extra" income that you can use to take a chunk out of your student loan balances, such as tax refunds, bonus pay, cash gifts, raises, and income from side hustles.

"In particular, focusing on growing your income through earning raises, trading up to a better job, or starting a side hustle can be great ways to generate more money you can use to target student debt," she said.

10. Pace yourself and stay motivated

"Paying off student loans is a marathon, not a sprint, and it requires similar skills and strategies," Kirkham said. She said to pace yourself and find a budget and student loan system that works best for you.

"Keep your eye on the prize and stay focused on your goal of paying off student loans," she said. "Track your progress and celebrate your wins as you go, from the first extra payment you make to the first student loan you pay off to the last payment you ever send a student loan servicer."
 
Copyright © 2018 Insider Inc. All rights reserved.

Thursday, October 04, 2018

September 2018 TLC medallion sales


The September 2018 New York City Taxi & Limousine Commission (TLC) sales results have been released to the public. And as is our practice, provided below are Jim Shenwick’s comments about those sales results.

1. The volume of transfers rose from August. In August, there were 54 unrestricted taxi medallion sales.

2. 44 of the 54 sales were foreclosure sales, which means that the medallion owner defaulted on the bank loan and the banks were foreclosing to obtain possession of the medallion. We disregard these transfers in our analysis of the data, because we believe that they are outliers and not indicative of the true value of the medallion, which is a sale between a buyer and a seller under no pressure to sell (fair market value).  One transfer was an estate sale for no consideration and another transfer was from the dissolution of a partnership, which also does not reflect fair market value and which we have also excluded from our analysis.

3. However the large volume of foreclosure sales (approximately 81%) is in our opinion evidence of the continued weakness in the taxi medallion market.

4. The eight regular sales for consideration ranged from a low of $160,000 (three medallions), $175,000 (two medallions), $180,000 (one medallion) and a high of $200,000 (two medallions).

5.  Accordingly, the median value of a medallion in September was $175,000, the same as in August.

In Jim Shenwick’s opinion, the new NYC law restricting the number of Uber, Via and Lyft licenses does not seem to have yet increased the value of taxi medallions.

Please continue to read our blog to see what happens to medallion pricing in the future. Any individuals or businesses with questions about taxi medallion valuations or workouts should contact Jim Shenwick at (212) 541-6224 or via email at jshenwick@gmail.com.

Wednesday, October 03, 2018

Crain's New York Business: Taxi lender Lomto Federal Credit Union picked up for scrap

Aaron Elstein

Lomto Federal Credit Union of Queens, which failed last year after taxi loans unleashed a shower of red ink, was acquired today by Teachers Federal Credit Union.

The acquisition comes exactly a month after Teachers Federal acquired another Queens institution done in by dud taxi loans: Melrose Credit Union.

Lomto and Melrose, along with the failed Montauk Credit Union and First Jersey Credit Union, were specialists in lending to buyers and owners of taxi medallions, the metal plates that confer the right to drive a cab. Before the rise of ride-hailing apps in 2014, the value of a taxi medallion soared to more than $1 million, and lenders came to see the loans as virtually risk-free. New York taxi medallions now sell for less than $200,000, often in foreclosure auctions.

Signature Bank and Medallion Financial also have reported big losses from taxi lending. The unraveling of the business has taken a toll on cabbies and medallion owners.

The city's leading medallion owner, Evgeny "Gene" Freidman, pleaded guilty in May to tax fraud related to his taxi business.

And on Sept. 18 Michael Cohen, President Donald Trump's former attorney, divested 10 medallions he controlled. The city forced the sale after Cohen pleaded guilty in August to eight criminal charges, including tax evasion related in part to the concealment of income generated by his medallions.

Copyright © 1996-2018. All Rights Reserved.

Monday, October 01, 2018

WSJ: Bankruptcy Watchdogs Push Congress for a Raise


WASHINGTON—The legal professionals who ensure people going through bankruptcy aren’t hiding assets are pushing lawmakers for their first pay raise since 1994, saying the robust oversight of the country’s personal-bankruptcy system is at stake.

In a House hearing on Wednesday, consumer-bankruptcy experts said the pay for the watchdogs, called bankruptcy trustees, should be doubled to $120 per case.

The experts said trustees play a vital role in the bankruptcy process by making sure people don’t hide valuable possessions and by returning recovered money to people and small businesses who are awaiting payment. Many are drawn to the work not for the pay, but for the prestige or public-service aspect. For most bankruptcy cases, they get only a flat fee, currently $60—far less than what they could earn for other legal work.

Roughly 1,100 trustees monitor chapter 7 cases, the most widely used form of bankruptcy for individuals. But during the hearing before a subcommittee of the House Judiciary Committee, experts testified they worried that the stagnant pay would lead to fewer competent, honest applicants. Last year, 20 candidates applied for every open chapter 7 trustee position, down from 58 in 2010, according to the Justice Department, which runs the program.

At the hearing, Rep. Tom Marino (R., Pa.) agreed with witnesses, calling trustees “vitally important” to the bankruptcy system. Mr. Marino is co-sponsor of a bipartisan bill that would raise trustees’ pay.

He said lawmakers agree the increase is necessary but they have “different paths to getting there,” referring to who should pay for it.

Trustees can uncover money and return it to pay off a bankrupt person’s debt to small businesses, credit-card companies and other individuals such as ex-spouses, Illinois trustee Neville Reid testified at the hearing. Taxpayers also benefit, he said, noting that chapter 7 trustees distributed roughly $170 million to state and federal tax authorities in 2016.

“Trustees frequently uncover schemes and wrongdoing that lead to prosecutions that prevent further injury or achieve justice for innocent people, even though the trustees frequently do not recover the value of their time investigating such matters,” Mr. Reid said.

The bill discussed at Wednesday’s hearing has support from two influential blocs, the American Bankers Association trade group and consumer-bankruptcy advocates. Several similar proposals have failed in the past.

The latest legislation would fund the pay increase by making bankrupt individuals pay higher fees.

Some lawyers and consumer-focused nonprofits are urging Congress to find another source of money to pay for the increase, such as a new fee for those filing requests for payment from someone going through bankruptcy.

Chapter 7 allows a financially troubled individual to sell property to repay certain bills before a judge cancels some unpaid debt, such as credit-card and medical bills. Last year, 472,190 individuals and couples filed for chapter 7 protection.

Trustees can also receive a second form of compensation beyond the flat fee: money from selling possessions and property valued above the limits of what a bankrupt person is allowed to keep. But cases with trustee sales are rare, occurring less than 10% of the time.

Under federal law, chapter 7 trustees review lists of individuals’ possessions and expenses and later question them in person. The compensation structure gives trustees incentives to look for hidden assets, but the model isn’t always successful. Jason Gold, a Washington, D.C., trustee, said that in at least 2,000 cases—nearly 8% of the total he has taken since 1989—he has spent a few hours to several days on a case only to realize there are no additional assets to sell.

Overall trustee compensation has fallen over the past six years, including an 18% drop in annual pay last year, Justice Department officials said. The decline comes as the number of people who file for bankruptcy each year has fallen since a 2010 peak.

Meanwhile, the number of bankrupt people who are so poor that they don’t have to pay the fee has increased in recent years. The number of chapter 7 cases with waived fees has grown to 4.7% in 2016 from 1.9% in 2007, testified Raymond Obuchowski, a Vermont-based trustee. Mr. Obuchowski has grown a long beard in protest of trustees’ pay, saying he won’t shave until Congress authorizes a raise.

Some consumer advocates say the low pay and drop in filings have driven trustees to be more aggressive in an attempt to boost their compensation.

Tara Twomey, executive director of the National Consumer Bankruptcy Rights Center, said trustees have gotten more creative in their recovery efforts since 2010, including by trying to sell property that bankrupt people would have historically been able to keep. Others have sued colleges to claw back tuition that bankrupt parents paid for their children.

Ms. Twomey supports the compensation increase but doesn’t want bankrupt people to pay for it. She and other consumer advocates said that a 2005 law already increased the costs of a system designed to help people who are financially struggling.

Rep. David Cicilline (D., R.I.) said he wouldn’t vote for the bill in its current form, saying the cost of bankruptcy is already “a great challenge for many people.”
 
Corrections & Amplifications

Jason Gold became a chapter 7 trustee in 1989. An earlier version of this article incorrectly said it was in 1998. (Sept. 26, 2018)

Copyright ©2018 Dow Jones & Company, Inc. All Rights Reserved.

Monday, September 24, 2018

Mic: New York city cab drivers face depression and debt amid increased competition from Uber and Lyft

Wednesday, September 12, 2018

Jacobin Magazine: The Graying of Bankruptcy

In a system where the majority of people have to sell their labor for wages to survive, people’s ability to support themselves financially almost always decreases as they age. Without public assistance, therefore, old age is comfortable only for those with savings, and uncomfortable if not downright miserable for those without.

This is why the United States passed the Social Security Act in 1935, which guaranteed a source of income to replace wages for all people 65 and older, along with the Social Security Act Amendments in 1965, which created Medicare, a public health insurance program for the same population. These programs are financed socially, by adjusting the tax rate schedule to accommodate them — that is, by requiring everyone in society to contribute, based on their ability to pay, for benefits that they will be entitled to after a certain age.

These and other mid-century programs made it a little bit easier to grow old in America, for a while. But they have come under strain as wages have stagnated and the cost of housing and education skyrocketed, placing a greater burden on social welfare programs to achieve adequate income for people. Meanwhile, programs themselves have been systematically starved of resources or outright eliminated.

Older Americans haven’t fared well. In fact, they’re filing for bankruptcy in record numbers. A new report from the Consumer Bankruptcy Project called “Graying of US Bankruptcy: Fallout from Life in a Risk Society” contends that, while it took a few decades to fully set in, older Americans are now experiencing the consequences of the assault on the social safety net that began under Reagan and has persisted, with leadership from both parties, ever since.

Running the Risk

“Government is not the solution to our problem,” Reagan was fond of saying. “Government is the problem.” His election inaugurated the reign of the free-market neoliberals, who advocated supposedly leaner and more efficient market-based alternatives to socially-funded government programs. Not coincidentally, these alternatives were friendly to capitalists — lower taxes, new lucrative private markets.

In 1982, Reagan established a commission made up of corporate executives whose task was to “root out inefficiency” in government spending. The Grace Commission issued “2,478 cost-cutting, revenue enhancing recommendations” that took aim at federal wages, retirement systems, healthcare programs, and a variety of federal subsidies which were deemed wasteful. The chairman of the commission, successful businessman J. Peter Grace, wrote to Reagan, “If the American people realized how rapidly Federal Government spending is likely to grow under existing legislated programs, I am convinced they would compel their elected representatives to ‘get the Government off their backs.’”

One man’s “getting the Government off their backs” is another’s evaporation of opportunity. As social programs have withered, wages have stagnated, and inequality has skyrocketed, many ordinary working people have lost their financial footing and their retirement prospects have dimmed. Today, just one hundred CEOs have the same amount of money stored away for retirement as the bottom 41 percent of the American population.

Meanwhile the age at which a person is eligible for full Social Security benefits has risen from 65 to 70, and the penalty for early retirement has increased up to 30 percent. Medicare recipients’ out-of-pocket costs are ballooning. Defined benefit pensions have been replaced with unpredictable and risky employee-owned 401(k)s. The list goes on.

And now the chickens are coming home to roost. The Consumer Bankruptcy Project found that since 1991, the rate of Americans age sixty-five to seventy-four filing for bankruptcy has doubled. The rate for those age seventy-five and over has tripled.

“The changes are so great,” they found, “that the broader trend of an aging US population can explain only a small proportion of what is happening in the bankruptcy courts. Older Americans’ reported reasons for filing strongly suggest that they are experiencing the fallout from our current individualized risk society and the corresponding shrinkage of their social safety net.”

The researchers’ data backs this up, suggesting that “that financial crises associated with living in America’s high-risk society are highly correlated with older Americans’ increasing use of the bankruptcy system.” As risk and responsibility have shifted from society as a whole onto individuals to pay their own way — even when they can’t work at all — older Americans are increasingly vulnerable to financial ruin.

The Means of Life

The responses to the questionnaires collected by the Consumer Bankruptcy Project illuminate the predicament that working-class older Americans are in. When asked the reason for bankruptcy, one respondent said:
All things went up in price. Retirement never went up. Had a part time job that was helping to meet monthly payments. House payment kept going up. Was fired from my part time job that I had for over 10 years without any warning. Being 67 and having back problems, not many people will hire you even as part time worker.
Here we can see the complex of problems that give rise to financial difficulty in old age. Income in retirement isn’t sufficient to cover the rising cost of living, including healthcare costs and payments on debt. After a lifetime of depressed wages, many people don’t have the savings to meet their financial responsibilities, yielding need employment to supplement their income.

But the aging body leads to a (real or perceived) inability to do the work needed to secure a wage. As a result, older Americans are increasingly left without much financial recourse besides personal bankruptcy — which is not a panacea, just a last-ditch effort to eliminate personal debt and stop the multiplication of costs.

One path to solving this problem is to make a concerted effort to drive up wages, control living costs, and repair the social safety net, so that people enter old age with savings instead of debt, and so that older people who can’t work still have a way to sustain themselves in their final decades. The Left should pursue this approach without reservation.

And there is a deeper issue, too, which requires a more radical solution in the long-term. The problem is that people are required to sell their labor to capitalists in order to have access to the means of life to begin with. What if, instead, we had a society where everyone was guaranteed a decent living just because they’re alive, not on condition of employment, and we pooled our resources and our productive capacities to make good on that guarantee? Then perhaps all people, young and old, could live with dignity.

Copyright 2018 Jacobin.  All rights reserved.

 

Thursday, September 06, 2018

August 2018 TLC medallion sales


The August 2018 New York City Taxi & Limousine Commission (TLC) sales results have been released to the public. And as is our practice, provided below are Jim Shenwick’s comments about those sales results.

1. The volume of transfers rose from July. In August, there were 52 taxi medallion sales.

2. 37 of the 52 sales were foreclosure sales, which means that the medallion owner defaulted on the bank loan and the banks were foreclosing to obtain possession of the medallion. We disregard these transfers in our analysis of the data, because we believe that they are outliers and not indicative of the true value of the medallion, which is a sale between a buyer and a seller under no pressure to sell (fair market value).  Three transfers were estate sales for no consideration and another transfer was from an individual to an LLC for no consideration, which also do not reflect fair market value and which we have also excluded from our analysis.

3. However the large volume of foreclosure sales (approximately 71%) is in our opinion evidence of the continued weakness in the taxi medallion market.

4. The 11 regular sales for consideration ranged from a low of $150,000 (one medallion), $160,000 (one medallion), $170,000 (one medallion), $172,500 (two medallions), $175,000 (two medallions), $180,000 (one medallion), $182,300 (one medallion), $185,000 (one medallion) and a high of $200,000 (one medallion).

5.  Accordingly, the median value of a medallion in August was $175,000, the same as in July.

In Jim Shenwick’s opinion, the new NYC law restricting the number of Uber, Via and Lyft licenses does not seem to have yet increased the value of taxi medallions.

Please continue to read our blog to see what happens to medallion pricing in the future. Any individuals or businesses with questions about taxi medallion valuations or workouts should contact Jim Shenwick at (212) 541-6224 or via email at jshenwick@gmail.com.