Student Loan Lawyer

Good morning. How we doing?

Good. How are you?

Uh, doing well, thank you.

Good. So let me go ahead and introduce you. So our guest today is Josh Cohen. He is a prominent consumer protection attorney widely recognized for his specialization in student loan law. He has built a national reputation for helping borrowers navigate complex student loan problems including loan default and repayment strategies, defense against collection actions, loan forgiveness programs, and discharge of student loan. He has helped clients discharge millions of dollars in student loan debt. A reminder, please like this podcast so that we could further discuss crucial legal issues. Welcome, Josh. Thank you so much for your time. Before I ask my questions, are there any topics you wish to present that you think that are crucial for the audience to hear about student loans?

Well, student loans, everything is crucial, so I'll, I'll, I'll bring it back at the end, whatever we might miss.

Okay, well, I think my first question would be, how do you discharge student loans? Because I've always been told you cannot. Discharge student loans in bankruptcy. So, but I heard a TikTok video recently saying that you could. So can you discharge in bankruptcy? And, and if not, and even if you can, how else do you discharge student loans?

So you got several methods of, of discharge. There are administrative discharges, which are those you don't need bankruptcy. If the debtor dies, that's a discharge. Okay, these loans go— they don't go anywhere. They don't get left to your estate. They don't get passed on to people. So survivor can send in a copy of the death certificate. Boom, loans are discharged. Close school discharge. If you attended school when it closed, you can get a discharge there. If you have a total and permanent disability, you can apply for a discharge, no bankruptcy needed. There's also the famous or infamous borrower defense to repayment. If you were materially misled to take a loan that, had you known then what you know now, you wouldn't have gone to the school, that's another way. Right now, with this administration, that may or may not be happening, but the process is still available. So those are administrative. Bankruptcy, it's not impossible to get your loans discharged, but it is difficult. What the bankruptcy code says is you can have your loans discharged if you can demonstrate an undue hardship. And to date, nobody— sorry, Congress has never defined the word undue hardship. They've left it to the courts, and because of that, we have a decision going back to 1987, the Bruner case out of New York. It's still what we use, is Bruner, with the exception of the 8th and the 4th Circuits, but they still use something similar, um, which basically has 3 prongs to it. Okay, prong number 1: you can't maintain a minimal standard of living and pay your student loan. Prong number 2— these are all paraphrases— um, you have something going on in your life that is above and beyond the average citizen that will last for a duration of the loan term, say 5 or 6 years. And the third one we don't know where this came from. You've made good faith efforts to repay the loan. Doesn't mean you repaid it. It means you tried. Maybe you had a payment plan that just wasn't affordable, but you have tried. So that made it very difficult. So what's happened? Things have changed. What changed was not the law. The law is still the same. What changed is the methodology. The Department of Education and the Department of Justice, lawyers for the government, got together under Trump version 1.0 and put together what's called the attestation process or DOJ guidance. And it's a new methodology of determining who qualifies for a discharge. Doesn't change the law, changes the method. So now it's a checklist starting with, can you on your budget afford a standard payment, a pay it off payment? IDR, income-driven repayment, not a factor, which means lower income people can now qualify for a discharge. Before they'd lose. Because if you walk into court and say, my payment's zero, where's your hardship? Now it's, well, my standard payment would be X and I can't afford it. You win the first prong. That's pure math. I'll skip to the third prong because that's easy too. You can show good faith efforts by, have you ever consolidated? Have you ever been on an IDR or applied for one? Have you made payments? Have you had forbearance and deferment? Have you spoken to your servicer? Have you ever spoken to the Department of Education? And my favorite, have you ever spoken to a third party who can help you with your loans? I'm a checkbox. So, um, the third, the third prong, you really can't lose either. It all really comes down to that second prong. And so here's where we get into the meat of it. There are a few bright line ones. For instance, if you're 65 or older, That's a checkbox. Have you been out of school for at least a decade? It doesn't matter how old your loans are. It matters how long you've been out of school. So I have people that have been in school from 2010 to 2020. That loan from 2010 is not 10 years old under the standard. You have to be out of school for a decade, and that is a threshold issue. So, okay. Do you have a disability or chronic injury that gets in the way of working? It's not that you can't work. That's a total and permanent disability. It's that you're limited in your work. You can work, but not up to your fullest potential. That's, that's a checkmark. Have you been unemployed for 5 of the last 10 years? And why? So someone that's a stay-at-home parent, because we all know it's cheaper to stay home than it is to work and pay for childcare, right? Things like that that can go in there. Are you currently unemployed? Potentially retired? Okay. Are you— do you have specialized training or a particular degree that you can no longer use? For instance, You have a— you went to law school, but you can't pass the bar. Well, you went to medical school, but you didn't get a placement, or you can't practice. Or maybe you aged out. Perhaps you were an airline pilot and now you're aged out mandatory requirements. So there are a lot of different ways you can fit into that.

And you're still talking about the criteria for bankruptcy when you say, yes, use your loan. You need to be in Chapter 13 where you can keep your car or keep your house, or Chapter 7.

Yep. Okay. And then, and then the last two checkboxes for the second prong are from regular case law. I either will never be able to make a substantial payment, standard payment, because maybe you capped out and you'll just never earn enough, or you won't be able to pay it long enough because you're close to retirement. You know, if you're 60 years old, you don't check that box that you're 65, but You're probably going to retire in the next decade and yet your payments are for another 20 years. You can check the box that I'm not going to pay for a long time. So you can put all of this stuff together, demonstrate your income, hard numbers based on tax returns and stubs and expenses and things. And you fill it all out. You give it to the Department of Justice attorney. They talk to Ed, they come back to you and say, okay, here's our offer. Now, here's where things get interesting, and proof is in the pudding. They expect an 85% discharge rate, and they are running at an 87% discharge rate, meaning of the people that have tried to do this, 87% get something, maybe not a full discharge, but they could get a partial discharge. And here's the more amazing fact. The people that are getting partial discharges, they are averaging an 85% discharge amount, meaning you walk in with $100,000, they discharge 85%, you walk out owing $15,000.

So does that $15,000 then begin to accumulate again? You know, what's that? Does that $15,000 then accrue interest and continue going forward again?

Okay, it does. But here's the beautiful thing: you walk out of the bankruptcy with whatever you walked in. So assuming you walked in having Income-Driven Repayment forgiveness credit, because your loan has to be at least a decade old, you should have at least 10 years worth of credit, hopefully. That means hypothetically you have 15 years left, but you only owe $15,000, which means you're probably going to pay it off or get forgiveness, that $15,000 should not be an issue. Again, a rough number, but—

So, to qualify for that forgiveness, do you need to have paid for that period? What if your loan is 20 years old and you've never paid on it?

So that's a great question. Under the Biden administration, most folks received retroactive credit for making any kind of payment, or if they were in some forbearances or some deferments. So many people got a fast forward or a catch up, I should say, on their forgiveness credit after 2024. That, that was done. So moving forward, you only get credit for payments made, even if it's a $0 payment. So yes, from here on out, you need to make payment in order to get credit.

How do you have a $0 payment? Send in the check for zero.

Well, no, there it's if you, if you've applied for your income-based repayment or whichever plan you're on and your, your math works out that you have a $0 payment, that still counts. It's not a forbearance, not a deferment. And your credit is reporting that you're making your payment every month for $0.

Okay, so that's good to know. Wow. Okay. Thank you so much. Well, I know that Trump abolish the Department of Education. What does that mean for our student loans?

So he's trying to dismantle it. And so far he started by just firing everybody. FSA, Federal Student Aid, is mandated to be housed at the Department of Education, which means they can't actually get rid of the Department of Education because if they do, there's nowhere for FSA to be. And that throws everything into flux. What we have seen, the latest announcement was that collections, any kind of collection, good or bad, when you're in good standing or default, is going to move to Treasury. Now, understand, Treasury has already been involved. Anybody who's been in default before COVID could have had their tax refund intercepted. That was through Treasury, or Social Security could be intercepted. That was through Treasury. So they're not, they're not foreign to this, but they— what they are not used to doing is servicing accounts in good standing. And that's where some of the trouble may, may happen. And there's a chance Treasury may say, we don't want your mess, because if you've seen the news, the Department of Ed is doing a terrible job of overseeing their servicers, and they've been doing that even when they were fully staffed. Treasury doesn't want this mess. So, you know, this is all up in the air, and, and at the end of the day, the servicers will have either Ed or Treasury to answer to. We just hope they'll actually answer. So the Treasury part is not as big a concern. The bigger concern is, are the servicers ever going to do what they're supposed to be doing and do it the right way, right?

Okay, well, um, and, and along that line, recently the government made a change to their SAVE program and converted what is called RAP— that's the acronym— and that's based on gross or net income. And, and I wonder, is that in the best interest for the public? But what does that mean for us, being gross versus net income? Because if it's gross, that could have a huge impact for, um, people who live in California where it's really expensive to live.

So it's always been gross income-driven repayment. Let's take this all apart. Income-driven repayment is the hub term, and under that we had SAVE, REPAY, PAY, ICR, IBR, new IBR. They're all there. SAVE is dead because of the lawsuit, and the budget wrote it off anyway. So SAVE is dead. Pay and ICR phase out July of 2028. IBR and new IBR survived. They're still here. These payments have always been based on gross income, adjusted gross income from your tax return. Now, RAP, which is the new plan, comes available July 1st, we hope, is also based on adjusted gross income. The difference between RAP and all the others is the formula. All of the IDRs we're used to look at your household size, which has different definitions if they're your children or other adults living with you. RAP only says you get deductions for people that you literally deduct on your taxes, so the family size is going to be different. Um, and with the IDR, they use the family size to determine your poverty property index and would subtract that out. RAP doesn't do that. RAP simply looks at your gross income and it is a sliding scale percentage. So for every $10,000 you earn, you pay 1% more. So if you're in the $20,000s, you pay 2%. $30,000, 3%. $40,000, 4%. All the way capped out to 10% if you're over $100,000. Divide that by 12, that's your payment. That's it. It's very simple math. And for every child— or sorry, for every deduction, for every dependent, that's the word— for every dependent you claim on your taxes, you get a $50 deduction in your monthly payment.

That's not—

you don't claim the child, don't get it. Yeah, exactly. Now, how does WRAP compare to IBR? Depends. Sometimes WRAP is more expensive, sometimes WRAP is cheaper. So, but it's always gross.

Sorry. And how do you verify income? I mean, does the student loan program go and actually get a copy of your taxes and then just automatically figure it out? Or how do you verify? So, do your service—

when you apply for any of these plans, when you apply for any of them, there's a box that says, hey, go to the IRS and get my stuff. If you don't check that box, or more importantly, if you opt out, then no, they don't get your tax return from the IRS. If you opt in, they get your tax return and they automatically renew you every year, which is good and bad. Um, I, for the vast majority of working folk, I don't think that's worth it because something can always change in your taxes, like you sell a house or you have capital gains. And if you've already given them permission, they go right away. If you opt out, you can upload your taxes, or maybe there's something on with your taxes that you want to use a pay stub or a letter from HR that says my base pay is X, or maybe you're self-employed, in which case what you made last month may not be what you made this month. So you don't want to use your taxes. You can use a self-certifying statement. My name is Josh, I'm an attorney, last month I made $5,000. That's it. So no, they only have access to your taxes if you check that box, and I don't think it's worth it for most people.

Oh, that's really very helpful information to know, not to check the box.

So yeah, you keep control.

So is it worth possibly, like, taking legal action against your servicer? If you do, do they have to prove anything? Do they have to verify the loan, verify that you knew and understood the payment plan? Or what about that approach for people?

So there's rarely an actual legal claim against your servicer. Really? Okay. Servicer, there's nothing saying the servicer has to prove its authorization. Okay, that is, that is an internet myth. I don't know where it came from. Well, if you do, for loans that are held—

sorry, I don't mean that. If you do ChatGPT, it says that they do. But anyways, go on.

Yes, and I know why it says that, because ChatGPT is confusing the Fair Debt Collection Practices Act with regular rights.

Okay.

FDCPA, Fair Debt Collection Practices Act, only applies to loans in default, meaning you're not with the servicer. When you're in default, your loan gets passed somewhere else. If you're with Mohela, AidVantage, Nelnet, Ed Financial, or CRI, your loan is in good standing. The FDCPA doesn't apply.

Hmm.

So you don't have a legal right to ask for authorization, nor does the FDCPA say you have the legal right for that anyway. What the FDCPA says is you have the right to dispute the debt and to verify the amount owed and the list of creditors that have ever owned the loan. Nowhere in there does it say you have the right to, to prove authorization that this debt collector can collect. That's a made-up thing.

Oh, really?

But back to student loans, when you're in good standing, you don't have a legal right to request it. And again, If your servicer is Mohela, AidVantage, Nelnet, EdFinancial, or CRI, boom, they are authorized. That's it. And you can verify through studentaid.gov. You can pull your data. It's going to tell you who your servicer is. So there's no reason for a lawsuit based on authorization. Um, if you're concerned that you're being overcharged or something's going on there, you better hire a forensic accountant first, because there is law, case law, actually out of California, that says your state laws about accounting don't reach to student loans. Now, that case law has been slowly eroded, but I also have to tell you, I've been doing student loan work since 2008. I have rarely, if ever, found such an accounting mishap that it rises to litigation. Remember, these guys are all using accounting software, and the idea that it glitched on yours but nobody else's— I have a hard— this is one of the things where it is just, it's not there. I think what happens is most people don't understand how it's calculated. It's daily interest, not monthly. Um, when are your payments being made? What's your due date? Are you missing the due date? What's the time from when you mail the check, if you're doing that, until they get the check and then they log the check versus electronic payments? It really comes down to a lot of people misunderstanding how it works. And, and this is not against the borrowers, but I often have people say, I've been paying for a decade, I've never missed a payment. And yet when I look at the data, it says you had 3 years of forbearance. Well, you're not paying if you're in forbearance. So the story slowly unravels. It's not that you screwed up. It's that life happened. You might have taken some time. That's okay. But I will tell you, an accounting claim is really rare. I don't— I'm not saying there aren't lawsuits worthy against servicers. I did one myself way back in '09 when I was a baby lawyer.. But you need an attorney that can dig into the student loan aspect of it. The contract aspect of it, there's rarely a claim there. And again, also realize student loans, federal student loans, are governed by federal law. So oftentimes your state law may not help you.

Okay. Wow. So it sounds like you never really go to court for for students. You basically help them, advise them like you're advising us right now. How do you discharge it with bankruptcy or other ways? And is there a way if there's not a payment plan that you can afford, is there any other way that you can say this payment plan that I qualify for doesn't work, I can only pay $100 a month or something, even though it doesn't— they don't give that to you.

So, um, number one, I always tell people to run the numbers for both RAP and IBR. That's where we are now. I do understand that sometimes the payment plan is not affordable, and if that's the case, I often send people to a bankruptcy attorney because maybe we need to reshuffle the budget. Do not come to me and say, well, I have credit card debt and I have to pay that because of my credit score. Guess what? That is the worst legal argument ever. Your federal loans take precedence over your credit card. I understand many people use credit cards to survive, and I— that's just the way it is. And that is why I turn people to bankruptcy attorneys so they can say, here's what bankruptcy can do. Here's— it may not make sense for you, but it might. So I want to learn all of the budgeting options. Sometimes it's just because a person feels like a particular debt is justified doesn't mean it's legally justified. I've got quite a few people that are paying for their parents or still paying for their, their children or something like that. In the eyes of the law, when it comes to budgeting, when it comes to a bankruptcy discharge, that's not the same standard. So a lot of this is crunching numbers and looking at your budget. And at the end of the day, I hate to say bankruptcy might be it, but you did touch on something else which I want to bring up. Under the Direct Loan Program, loans originated by the Department of Ed, there is an alternative payment plan. If you find that none of these IDR payment plans work, you are allowed to ask your servicer for an alternative payment plan, but you have to be willing to turn over all your financials, your taxes, your budget, your expenses, and you have to be able to show evidence of those expenses. Don't give me a bank statement full of Venmo because your friend pays bills and you pay them back and all that. Don't do that. I want to see that you're paying the electric bill and the garbage bill and the snowplow and your mortgage and all this. Okay, it gets a little watered down if you have roommates and stuff. That's the way it is. But, um, you can ask for alternative payment, and I'm going to tell you, I can almost guarantee servicers will screw this up because it's so rare.

Oh, really?

Most people can find a way to make it work. The other problem is the alternative payment plan does not get forgiveness.

Oh, really?

So if you're on an alternative plan, you're not getting forgiveness. You're going to pay it forever, which is why I stress to people, find a way to make RAP or IBR work for you.

Okay. Boy, I wish I would have talked— spoken to you a couple of years ago.

Yes. Me too.

That's been very, very helpful. I've been trying to legally challenge my student loan, but it sounds like I should just back out of it and, uh, accept the law that I paid for court.

I won't say that there aren't, there aren't claims, but you know, I, I'm, I'm surprised sometimes some people have some interesting threads. You know, the case that I did back in '29, it was a very interesting thread. But, you know, part of it is it's no fault of the borrower, but many of us are playing a game and we have no idea what the rules are.

Right.

How do you do that?

Yeah.

I mean, that's like playing a game with a toddler. They don't care and it works the way they want, you know. And we unfortunately are the toddler. Yeah, we just, we just don't know. And so my goal is to educate people so they can understand what the rules are. And most of the time, IBR-RAP will work.

Okay. Yeah. Even the II doesn't know the rules.

So, yes.

Well, I really, I know that you're here for a short time and our time is up, but I really appreciate your time very much. Thank you so much. And would you like to give everybody your contact information so they can contact you for more advice?

Yep. So you can find me at thestudentloanlawyer.com. I do offer a free review to see if there's something that's worth talking about. And, you know, I'm happy to talk student loans. We didn't even touch upon private student loans, but I can also sometimes work some magic there. They're much more limited in what we can do, but if there's a thread, I'll pull it and I'll tell you how it works. But I'm— I would rather give people— I'm all about giving people the reality of the situation. If it's bad, if it's ugly, if it's good, whatever it is, because once you know it, then you can find a way to move forward. And that's my goal.

Yeah, great. Thank you so much. And hopefully, yeah, everybody I'm sure is going to benefit a lot from your advice. So thank you so much for your time, Joshua.

Thank you for having me.

Have a great day.

All right, bye now.

Bye.