Posts Tagged ‘false certification discharge


Student Debt Continues to Pile Up

The number of student loans held by subprime borrowers is rising, and more of those loans are going bad, the latest signs that a weak job market and rising debt loads are hurting recent college grads.

In all, 33% of all subprime student loans in repayment were 90 days or more past due in March 2012, up from 24% in 2007, according to a Wednesday report by TransUnion LLC.

TransUnion discovered that 33% of the almost $900 billion in outstanding student loans was held by subprime borrowers as of March 2012, up from 31% in 2007.  Subprime borrowers are the least credit worthy.

Another study, released by Fitch Ratings warned that the difference between college costs and amounts students can borrow under the federal student-loan program will continue to enlarge.

In the five years through last March, the segment of all student loans that were 90 days or more delinquent rose to 11.4% from 8.8%, while the average student-loan balance per borrower increased 30% to $23,829.

Another study, released by credit-score provider Fair Isaac Corp., found that roughly 26 million consumers had two or more open student loans on their credit report in October 2012, up from about 12 million in 2005. A majority of bank risk managers expect student-loan delinquencies to continue to rise.

Repaying debt has become more difficult in part because loan balances have grown and the interest rates on federal loans have increased as a result of a shift from variable-rate to fixed-rate loans. Most federal loans now carry interest rates of 6.8% or 7.9%, versus a rate of 2.875% on federal Stafford loans in May 2005.

If you are in default on your student loans, contact the Zarcone Law Firm for a FREE consultation.

619-800-3082 or


a new program for college loan affordability

A new federal program should make it easier for some recent college graduates to keep their student-loan payments manageable.

The new program, known as the “Pay as You Earn Repayment Plan,” allows eligible borrowers greatly lower their monthly loan payments and qualify for loan forgiveness quicker than previously.


If your debt exceeds your annual income, the new program will probably work for you.  The new program comes at a time when rising student-loan obligations—amid a still poor job market—have weighed greatly on many borrowers.

Typically, federal student loans must be repaid within 10 years. At current interest rates, that can work out to a monthly payment of roughly $300 for a borrower with $26,000 in debt.

Pay as You Earn, by contrast, limits student-loan payments to 10% of “discretionary income” as defined by government formulas. Borrowers who make regular payments could have the remaining unpaid amounts forgiven after 20 years.

In some situations, borrowers with low incomes could be required to make a zero-dollar payment and would still be considered current on their loan. Monthly payments can increase or decrease each year based on the borrower’s income and family size.

The new program is more generous than the Obama administration’s Income-Based Repayment Plan, or IBR, launched in 2009. IBR caps loan payments at 15% of discretionary income, and borrowers can have unpaid amounts forgiven after 25 years.

Under both programs, borrowers with public-service jobs may qualify for loan forgiveness after just 10 years.

Pay as You Earn is available only to borrowers with federal direct student loans, but other borrowers can consolidate existing federal student loans into a direct loan to take advantage of the program, provided they meet other requirements.

To be eligible for the program, borrowers must have obtained their first federal student loan after Sept. 30, 2007, and received at least one federal student loan after Sept. 30, 2011. Borrowers also must meet eligibility cutoffs based on the size of their debt, their discretionary income and family size.

The new program isn’t for everyone. Since the loan is repaid over a longer time period, some borrowers could wind up paying more interest than they might have otherwise.

To remain in the program, borrowers also must provide their loan servicer with updated information about their income and family size each year.

Under current federal rules, many borrowers could face a tax bill on the amount of debt that is forgiven. Debt forgiven under the public-service loan-forgiveness program is currently tax-free.

If you are being crushed by college loans, please contact the Zarcone Law Firm at 619-800-3082 for a FREE consultation.


Student Loan Debt: False-Certification Discharge

Borrowers are entitled to a loan discharge if they received at least part of an FFEL or Direct loan after January 1, 1986 and if their eligibility to borrow was falsely certified by the school.  The discharge does not apply to Perkins loans, but students should be able to raise the school’s misconduct as a defense to loan repayment because the school is the original lender.

The Department of Education recognizes four bases for a false-certification discharge:

  • The school falsifies a non-high-school graduate’s ability to benefit from the program;
  • The school enrolls a student unable to meet minimum state employment requirements for the job for which the student is being training;
  • The school forges or alters the student loan note or check endorsements;
  • The borrower is a victim of identity theft.

If you believe that your student loans should be discharged, please contact the Zarcone Law Firm for a FREE consultation at 619-800-3082.

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