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New rule affects those in default on student loans

On Behalf of | Mar 30, 2017 | Chapter 13

While filing for bankruptcy in Davidson can help alleviate many financial struggles, many types of student loans are not dischargeable in bankruptcy and some borrowers may find themselves struggling to make timely payments. In fact, the number of people who defaulted on student loans in 2016 was over 1 million, according to the Penny Hoarder.

Now those people may have something more to worry about. Previously, lenders were prohibited from charging borrowers fees if they were late on payments but making an effort to bring their accounts current. The Department of Education has now reinstated the ability for lenders to charge those fees, up to a rate of 16 percent of the outstanding loan balance. For people who are already struggling to make payments, such hefty fees would only add to their financial struggles.

It is important to note that these fees only apply to government loans that were made prior to 2010 through the Federal Family Education Loan program. Those who took out loans after that program ended will not be subject to the fees.

However, just because these lenders now have the ability to charge these fees does not necessarily mean that they will choose to do so. Many have spoken out against the rule change and it seems that the loan companies were listening. According to Bloomberg, FFEL loans were issued by 26 lenders, all of which have indicated that they will not charge costly fees to accounts that are brought back into good standing within 60 days. This is certainly good news for many student loan borrowers who are having a hard time making payments.


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