How the Incoming Trump Administration Can Help Student Loan Borrowers

Published: Friday, November 18, 2016 @ 1:30 AM

The 2016 presidential election is settled and a new administration will take office in two months’ time. Considering all that was said during this particularly contentious campaign, it’s no surprise that student loan borrowers are concerned about what that will mean to them beginning in 2017.

Two of the many items on my list of concerns have to do with the future of the Consumer Financial Protection Bureau, within the context of a potential repeal or overhaul of the Dodd-Frank legislation that created the consumer watchdog agency in the first place, and the Federal Direct Student Loan program, which the Obama administration established in 2010 as a successor to the simultaneously discontinued Federal Family Education Loan program.

The Possible Negatives

In the case of the CFPB, should Congress move to curtail the agency’s regulatory authority and/or impose more stringent oversight on its activities, I worry that less will be done to address loan-servicing-related problems, which include the misapplication of remittances on the part of private-sector administrators and their failure to promptly conduit financially distressed debtors into a government-sponsored payment relief program, or to prevent collection companies from pursuing past-due payments in a manner that violates the Fair Debt Collection Practices Act. (You can see how your student loan repayments are impacting your credit by checking your two free credit scores, updated every 14 days, on Credit.com.)

As for the Federal Direct Loan program, a financial services industry that benefited from virtually risk-free income courtesy of the government-guaranteed FFEL program is probably getting pretty excited about the potential for its reincarnation, now that smaller-government-minded lawmakers are in control of all three branches of our system. And not just for the new loans that will be taken out in the future.

A Fresh Approach

At present, roughly one trillion dollars’ worth of Federal Direct Loans are currently on the books, plus another $200 billion to $300 billion in legacy FFELs.

But if one were to tally together all the federally-backed loans that are at present delinquent and in default, plus all those that have been granted temporary forbearance and longer-term relief to date, and compare that total to the aggregate value of all the loans that are currently in repayment, that number would approach 50%.

Any loan portfolio that looks anything like that is one whose loan agreements were improperly structured at the outset. If we want these debts to be repaid anytime soon — without continuing to spend outrageous sums of money to accomplish that objective — the new administration would be wise to bite the bullet and restructure all these contracts over an extended term at a rate that properly reflects the federal government’s costs.

That’s the first step.

The second is to lock in that cost by financing the Federal Direct loans that currently reside on the education department’s balance sheet as any prudent private-sector lending institution would, instead of continuing the government’s potentially ruinous tact of borrowing short to lend long in a rising-interest-rate environment. The new financing can take the form of direct borrowing on the part of the federal government as it does now, or the education department can oversee the sale of these loans into the private sector while retaining administrative oversight of their servicing.

This stands in contrast to the old FFEL program, where private-sector lenders originated student loans backed by the federal government, and had the option to later sell these contracts into the secondary market for added profit. Not only did that program create significant remunerative opportunities at the expense of taxpayers (who would be called upon to make good on the government’s guarantees), but it also distanced the feds from directly overseeing the administration of the loans it backed.

In a nutshell, that’s the key reason why there’s been so much foot-dragging on the part of the companies that service the FFEL loans that are in repayment: the interests of the private-sector note holders and investors are at odds with those of the taxpayers.

Finally, the new administration would also be wise to address the matter of student loan dischargeability in bankruptcy. Not so that borrowers would have an easier time getting out from under the legitimate debts they incurred, but so the potential for abject loss at the point of default would inspire all lenders to negotiate in good faith with financially distressed debtors who, for the most part, truly desire to honor their obligations.

All of this boils down to having the courage to take an evenhanded approach to solving a trillion-dollar problem. Hopefully, this new administration has enough of that to go around.

This story is an Op/Ed contribution to Credit.com and does not necessarily represent the views of the company or its partners.

 

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Numbers don’t lie: 5 things to know about your FICO score

Published: Tuesday, October 03, 2017 @ 10:37 AM
Updated: Tuesday, October 03, 2017 @ 10:37 AM

To get into the all-important "good credit" score range, experts recommend these five strategies Check and re-check your credit report Avoid quick-fix promises Delinquent payments can seriously damage your FICO scores Pay off more of what you owe Apply for credit cards one at a time

With the 2017 hacking of credit bureau Equifax, credit scores have been in the spotlight recently. But credit scores are important every day for adults who earn or borrow money, especially the FICO score, which is used by 90 of the top 100 largest U.S. financial institutions. 

RELATED: Equifax data breach: What to know

Just what is a FICO score? The short answer: the global standard for measuring credit risk in the banking, mortgage, credit card, auto and retail industries, created by Fair Isaac Corporation. The average adult has FICO scores from each of the three main credit bureaus: Equifax, TransUnion and Experian. FICO scores are based on amounts owed (30 percent), new credit (10 percent), length of credit history (15 percent), payment history (35 percent) and credit mix (10 percent).

A low FICO score might contribute to a lender's decision to deny you credit and could increase the cost of an auto loan by almost $5,000, according to Consumer Reports. A high FICO can save you thousands annually on everything from reduced credit card interest to the size of the deposit you must pay for electric utility service.

RELATED: Uber isn't everything: 7 other lucrative part-time side gigs 

To get into the all-important "good credit" score range, Consumer Reports and myFICO.com recommend these five strategies:

Atlanta-based consumer credit reporting agency Equifax reversed a decision to include forced arbitration language in its terms of service for its free credit monitoring products after a public outcry earlier this month. The company said a breach of its computer systems had exposed the Social Security numbers and birthdates of up to 143 million U.S. consumers. (Dreamstime/TNS)(The Atlanta Journal-Constitution)

Check and re-check your credit report

Request one free credit report from a different reporting agency every four months through AnnualCreditReport.com and check for errors, according to Consumer Reports. If you find an error, dispute it with the credit bureau. Pay particular attention to make sure no one has incorrectly listed a late payment on any of your accounts or miscalculated amounts owed on any open accounts. "Hard pull" credit inquiries, which are made by potential lenders with your permission, can lower your FICO score slightly, but this is different. When you check on your own credit, there's no penalty. 

Avoid quick-fix promises

According to myFICO.com, so-called "quick fix" efforts to repair your credit history are the most likely to backfire, so consumers should be leery of any advertisements or credit counselors claiming they can improve your credit score fast. Depending on the reason for a low score, you may need 12 to 24 months before any efforts (except for error corrections) start showing on your score. You can accelerate the improvement by enrolling in a debt-management program and making payments on time, but there's no instant fix.

(Contributed by nestiny.com/For the AJC)

Persistently pay your bills on time

Even if you are only missing payments by a few days, delinquent payments can seriously damage your FICO scores, particularly since you can't fix previous missed or late payments. If you have missed payments, get current and stay current so you can demonstrate that the problem is in the past. Accoding to myFICO, older credit problems count for less and will fade as your new on-time payment pattern starts showing up on your credit report. Some older versions of FICO keep collection accounts on your credit report for up to seven years even if they're paid off, but the most current versions of FICO ignore any collections when the balance is zero, according to Consumer Reports.

Pay off more of what you owe

The "amounts owed" category makes up 30 percent to your FICO score calculation. Unlike payment history, you can address it immediately, but you'll need financial discipline: "The most effective way to improve your credit scores in this area is by paying down your revolving–credit card–debt." Don't close unused credit cards as a short-term plan to up your scores, since it may just increase the percentage of available credit you are using - a no-no for high credit scores. The same goes for opening a new credit cards you don't need: while it will increase your available credit, it could negatively impact the average age of your credit accounts and damage your FICO scores.

Apply for credit cards one at a time

When you apply for multiple credit cards at the same time, you generate several "hard pull" requests for your credit history, which can hurt your FICO score, according to Consumer Reports. This advice only holds true for credit cards, not house, car or student loans. 

MyFICO also reminds consumers that while FICO scores are important, they're not the be-all and end-all. Lenders look at information such as the amount of debt you can reasonably handle given your income, your employment history and your credit history. Based on their perception of this information, as well as their specific underwriting policies, lenders may extend credit to you even if your score is low - or decline your request for credit even though your score is high.

To get started improving your FICO score, access myFICO's estimator tool, which helps you approximate your score range without any identifying information. It also offers a direct link that allows you to file an online credit report dispute and gives more detailed answers to the question "What is FICO?"

Scene 75 CEO buys former ITT property

Published: Tuesday, September 26, 2017 @ 2:34 PM

Jonah Sandler is the CEO of Scene 75 Entertainment Center. LISA POWELL / STAFF
Jonah Sandler is the CEO of Scene 75 Entertainment Center. LISA POWELL / STAFF

A holding company run by the chief executive of Scene 75 Entertainment has bought the nearby former ITT Tech school property on Stop Eight Road.

JDS Commercial Holdings LLC — of which Jonah D. Sandler is the principal — bought the former school property at 3325 Stop Eight Road for $740,000, Montgomery County property records show.

RELATEDMental health agency plans $1 million property investment

Five years ago, Sandler opened Scene 75 at 6196 Poe Ave. Since then, he has announced plans to open a third entertainment location 30 miles south of Cleveland in Brunswick, Ohio. Besides the Dayton center, the company also has a 84,000-square-foot Cincinnati-area venue in Milford.

The former school — which closed last September — is just south of Scene 75 on Poe, near the intersection of Poe and Stop Eight.

RELATEDBuyer pays $4.3M for property near airport

Last year, ITT Technical Institute closed all 130 of its campuses nationally in a move that put 8,000 employees out of work, in the wake of federal sanctions against the school.

A message seeking comment was left with Sandler Tuesday.

Eastway plans total $1M property investment

Published: Tuesday, September 26, 2017 @ 8:26 AM

A model of the newly remodeled Eastway Behavioral Healthcare headquarters on Wayne Avenue. The agency is purchasing a former print shop on Bainbridge near the headquarters. In total, the agency is investing $1 million into both its headquarters remodeling and the property purchase. THOMAS GNAU/STAFF
A model of the newly remodeled Eastway Behavioral Healthcare headquarters on Wayne Avenue. The agency is purchasing a former print shop on Bainbridge near the headquarters. In total, the agency is investing $1 million into both its headquarters remodeling and the property purchase. THOMAS GNAU/STAFF

Eastway Behavioral Healthcare, a mental health services agency, is purchasing an industrial building and parking lot across Bainbridge Street near its Dayton headquarters, with plans to create a center for job training there, agency leaders announced Monday evening.

Dayton-based Eastway Behavioral Healthcare has already announced an investment of about $500,000 into remaking its 600 Wayne Ave. headquarters and pharmacy — and agency leaders announced their plans for the Bainbridge property Monday at a 60th anniversary celebration at the Victoria Theatre.

Together, the refurbishing of the headquarters and the purchase of the Bainbridge property amount to a total investment of about $1 million, Eastway officers said.

RELATEDDayton mental health agency has national impact

Krystal Burke, Eastway director of business development, said she recently approached the owner of the property about the possibility of leasing some of his parking spaces to Eastway. Instead, he offered to sell the entire site, including the building where a printing and packing business had been located for decades, Burke said.

The business was Print Products Inc., 419 Bainbridge.

“It’s a very attractive building on the inside,” Burke said. “There were a lot of upgrades.”

RELATEDMental health agency to make $5ooK headquarters investment

She added: “I told John (Strahm, Eastway president and chief executive), ‘Just hear me out. I think I stumbled on a really great opportunity.’”

One of Ohio’s largest mental health care agencies, Eastway in recent months has expanded its service footprint to include Columbus and Washington Court House, even serving clients nationally from as far away as Idaho.

“Our message to the Dayton community, although we have expanded our catchment areas to Columbus … our primary commitment for 60 years has been serving the needs of these people in Dayton.”

In the past decade, the agency’s revenue has nearly doubled, from $16 million annually in 2007 to an expected $30 million in this fiscal year, Eastway leaders said.

“It’s planned growth,” Burke said. “It’s not just to see how big or how fast we can grow.”

Each year, the agency treat 3,500 adults in Dayton. The agency manages 24 facilities across mostly Southern and Central Ohio.

Jury trial scheduled in Reynolds lawsuit

Published: Thursday, August 31, 2017 @ 9:29 AM

Kettering-based Reynolds and Reynolds has about 1,300 local employees. TY GREENLEES / STAFF
Kettering-based Reynolds and Reynolds has about 1,300 local employees. TY GREENLEES / STAFF

A jury trial has been scheduled in an antitrust lawsuit against a major Kettering employer and a second company in federal court.

According to a schedule filed Wednesday in federal court in Wisconsin’s western district, a trial in Authenticom’s lawsuit against Kettering’s Reynolds and Reynolds and CDK Global LLC is set to happen Oct. 22, 2018.

That’s if the case gets that far: Confidential settlement proposals — outlining terms of a possible settlement in the case — are due by Aug. 20, 2018. Those letters will not be part of the lawsuit’s public record, the filing said.

RELATEDDC attorney: FTC probes not to be taken lightly

Both Reynolds and CDK are being sued by a third company, LaCrosse, Wisc.-based Authenticom Inc., which has accused the two companies of forming an agreement or business relationship against it. Authenticom charges that the two defendants have kept it out of auto dealership databases, even when auto dealers approved Authenticom’s use of those databases.

A spokesman for Reynolds has said the company believes that its policy of not allowing “unauthorized intermediaries” into its auto dealer database systems ultimately protects dealership data.

RELATEDCourt stays injunction against Reynolds

Authenticom is an auto dealer data integration service provider, while Reynolds and CDK are much larger companies offering auto dealer business management systems.

Meanwhile, publicly traded CDK recently revealed in a Securities and Exchange Commission filing that the Federal Trade Commission has asked CDK to “produce documents relating to any agreements between ourselves and Reynolds and Reynolds.”

CDK has said the company is cooperating with the request. A Reynolds spokesman has not commented on the FTC questions.

“The parties and their attorneys must at all times treat everyone involved in this lawsuit with courtesy and consideration,” Magistrate Judge Stephen Crocker wrote in Wednesday’s filing. “The parties must attend diligently to their obligation in this lawsuit and must reasonably accommodate each other in all matters so as to secure the just, speedy and inexpensive resolution of each proceeding in this matter.”

Reynolds has about 1,300 employees in a County Line Road campus near the Kettering-Beavercreek border.