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California Applauds Appointment of U.S. Education Secretary Cardona and Joins States in Asking for Better Student Loan Protections

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Welcoming renewed federal partnership, California DFPI joins other regulators asking Secretary to reverse policies undermining states’ oversight of student loan servicers

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SACRAMENTO – The California Department of Financial Protection and Innovation (DFPI) joined financial regulators across the country to congratulate newly-confirmed Education Secretary Miguel Cardona and invited him to partner with states in protecting student loan borrowers by reversing policies and guidelines issued by the previous administration.

In a letter signed by DFPI Commissioner Manuel P. Alvarez, state regulatory officials call attention to two policies instituted by former Secretary Betsy DeVos that obstruct states’ ability to regulate the private companies that service federal student loans. The state regulators urge Secretary Cardona to reverse these policies and to join states’ efforts to ensure the student loan servicing industry is a resource for borrowers, not a barrier to relief or source of harm.

“Over the past few years, California has worked to fill a void left by the federal government in shielding student loan borrowers from predatory practices,” said Commissioner Alvarez. “With the confirmation of Secretary Cardona, we look forward to working anew with federal partners to protect California borrowers and help mitigate the ongoing student loan debt crisis.”

The New York State Department of Financial Services (DFS) submitted the letter on behalf of a coalition of financial regulators from California, Colorado, Connecticut, Illinois, Maine, Massachusetts, New Jersey, New York, Rhode Island, Washington, and Wisconsin. Specifically, the letter urges Secretary Cardona to reverse two policies instituted by former Secretary DeVos that obstruct states’ regulation and oversight of the servicing industry.

  • First, the former administration issued guidance asserting that federal law preempts states’ regulation of the private companies that service federal student loan, including licensing requirements and other consumer protections.
  • Second, the former administration and the student loan servicing industry attempted to use the federal Privacy Act of 1974 as a shield against states’ requests for information, claiming that federal law prohibited student loan servicers from sharing certain information with states.

Each of these two policies created unnecessary and legally dubious obstacles to states implementing common-sense consumer protections and investigating potential misconduct.  The coalition’s letter urges Secretary Cardona to reverse these two policies to allow states to proceed without federal opposition and as a way to partner with states in protecting student loan borrowers.

A copy of the submitted letter can be found here: https://dfpi.ca.gov/2021-state-regulators-letters-to-sec-of-ed.

Currently, there is approximately $1.6 trillion in outstanding federal student loan debt, owed by 43 million loan borrowers across the country. Approximately $125 billion of that outstanding debt is owed by 3.7 million borrowers in California. Nationwide, student-loan debt is the second-largest class of consumer debt behind mortgage loans.

These federal loans are all serviced by private companies. These servicers process monthly bills and payments, administer loan repayment and cancellation programs such as Public Service Loan Forgiveness, and are often borrowers’ sole points of contact for help managing their loans. However, for years there have been instances of servicers providing inaccurate information or engaging in harmful misconduct, often resulting in increased costs and extended repayment periods for borrowers. Several states and the federal government have investigated these practices.

In response to this growing crisis, some states have passed laws to require private servicers to obtain licenses to do business in their jurisdictions and requiring them to follow specific servicing rules and protections. In California, the Student Loan Servicing Act, which became operational on July 1, 2018, requires persons engaged in the business of servicing student loans in California to obtain licenses and be subject to DFPI oversight. In 2020, California passed the California Consumer Financial Protection Law to better protect consumers and foster responsible financial innovation. The law, which took effect on Jan. 1, 2021, expanded the DFPI’s regulatory and enforcement authority to cover previously unregulated consumer financial products and services, including student loan debt relief companies.

The DFPI warns cautious student borrowers about being lured by claims of fast loan forgiveness. While some companies promise to reduce student-loan debt for a cost, consumers can apply for loan deferments, forbearance, repayment, and forgiveness or discharge programs directly through the U.S. Department of Education or their loan servicer at no cost. For federal student-loan repayment options, visit StudentAid.gov/repay. For private student loans, borrowers can contact the loan servicer directly. To file a complaint directly with the DFPI regarding a debt-relief company, visit: https://dfpi.ca.gov/file-a-complaint.

In addition to regulating student-loan servicers, the DFPI licenses and regulates financial products and services, including state-chartered banks and credit unions, commodities and investment advisers, money transmitters, the offer and sale of securities and franchises, broker-dealers, nonbank installment lenders, payday lenders, mortgage lenders and servicers, escrow companies, Property Assessed Clean Energy (PACE) program administrators, debt collectors, rent-to-own contractors, credit repair and consumer credit reporting agencies, debt-relief companies, and more.



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Are Sallie Mae Student Loans Federal or Private?

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When you hear the name Sallie Mae, you probably think of student loans. There’s a good reason for that; Sallie Mae has a long history, during which time it has provided both federal and private student loans.

However, as of 2014, all of Sallie Mae’s student loans are private, and its federal loans have been sold to another servicer. Here’s what to know if you have a Sallie Mae loan or are considering taking one out.

What is Sallie Mae?

Sallie Mae is a company that currently offers private student loans. But it has taken a few forms over the years.

In 1972, Congress first created the Student Loan Marketing Association (SLMA) as a private, for-profit corporation. Congress gave SLMA, commonly called “Sallie Mae,” the status of a government-sponsored enterprise (GSE) to support the company in its mission to provide stability and liquidity to the student loan market as a warehouse for student loans.

However, in 2004, the structure and purpose of the company began to change. SLMA dissolved in late December of that year, and the SLM Corporation, or “Sallie Mae,” was formed in its place as a fully private-sector company without GSE status.

In 2014, the company underwent another big adjustment when Sallie Mae split to form Navient and Sallie Mae. Navient is a federal student loan servicer that manages existing student loan accounts. Meanwhile, Sallie Mae continues to offer private student loans and other financial products to consumers. If you took out a student loan with Sallie Mae prior to 2014, there’s a chance that it was a federal student loan under the now-defunct Federal Family Education Loan Program (FFELP).

At present, Sallie Mae owns 1.4 percent of student loans in the United States. In addition to private student loans, the bank also offers credit cards, personal loans and savings accounts to its customers, many of whom are college students.

What is the difference between private and federal student loans?

When you’re seeking financing to pay for college, you’ll have a big choice to make: federal versus private student loans. Both types of loans offer some benefits and drawbacks.

Federal student loans are educational loans that come from the U.S. government. Under the William D. Ford Federal Direct Loan Program, there are four types of federal student loans available to qualified borrowers.

With federal student loans, you typically do not need a co-signer or even a credit check. The loans also come with numerous benefits, such as the ability to adjust your repayment plan based on your income. You may also be able to pause payments with a forbearance or deferment and perhaps even qualify for some level of student loan forgiveness.

On the negative side, most federal student loans feature borrowing limits, so you might need to find supplemental funding or scholarships if your educational costs exceed federal loan maximums.

Private student loans are educational loans you can access from private lenders, such as banks, credit unions and online lenders. On the plus side, private student loans often feature higher loan amounts than you can access through federal funding. And if you or your co-signer has excellent credit, you may be able to secure a competitive interest rate as well.

As for drawbacks, private student loans don’t offer the valuable benefits that federal student borrowers can enjoy. You may also face higher interest rates or have a harder time qualifying for financing if you have bad credit.

Are Sallie Mae loans better than federal student loans?

In general, federal loans are the best first choice for student borrowers. Federal student loans offer numerous benefits that private loans do not. You’ll generally want to complete the Free Application for Federal Student Aid (FAFSA) and review federal funding options before applying for any type of private student loan — Sallie Mae loans included.

However, private student loans, like those offered by Sallie Mae, do have their place. In some cases, federal student aid, grants, scholarships, work-study programs and savings might not be enough to cover educational expenses. In these situations, private student loans may provide you with another way to pay for college.

If you do need to take out private student loans, Sallie Mae is a lender worth considering. It offers loans for a variety of needs, including undergrad, MBA school, medical school, dental school and law school. Its loans also feature 100 percent coverage, so you can find funding for all of your certified school expenses.

With that said, it’s always best to compare a few lenders before committing. All lenders evaluate income and credit score differently, so it’s possible that another lender could give you lower interest rates or more favorable terms.

The bottom line

Sallie Mae may be a good choice if you’re in the market for private student loans and other financial products. Just be sure to do your research upfront, as you should before you take out any form of financing. Comparing multiple offers always gives you the best chance of saving money.

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Tips to do some fall cleaning on your finances

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Wealth manager, Harry Abrahamsen, has five simple ways to stay on top of the big financial picture.

PORTLAND, Maine — Keeping track of our financial stability is something we can all do, whether we have IRAs or 401ks or just a checking account. Harry J. Abrahamsen is the Founder of Abrahamsen Financial Group. He works with clients to create and grow their own wealth. Abrahamsen shares five financial tips, starting with knowing what you have. 

1. Analyze Your Finances Quarterly or Biannually

You want to make sure that your long-term strategy is congruent with your short-term strategy. If the short-term is not working out, you may need to adjust what you are doing to make sure your outcome produces the desired results you are looking to accomplish. It is just like setting sail on a voyage across the Atlantic Ocean. You know where you want to go and plot your course, but there are many factors that need to be considered to actually get you across and across safely. Your finances behave the exact same way. Check your current situation and make sure you are taking into consideration all of the various wealth-eroding factors that can take you completely off course.

With interest rates very low, now might be a good time to consider refinancing student loans or mortgages, or consolidating credit card debt. However, do so only if you need to or if you can create a positive cash flow. To ensure that you are saving the most by doing so, you must look at current payments, excluding taxes and insurance costs. This way you can do an apples-to-apples comparison.

The most important things to look for when reviewing your credit report is accuracy. Make sure the reporting agencies are reporting things actuary. If it doesn’t appear to be reporting correct and accurate information, you should consult with a reputable credit repair company to help you fix the incorrect information.

4. Savings and Retirement Accounts

The most important thing to consider when reviewing your savings and retirement accounts is to make sure the strategies match your short-term and long-term investment objectives. All too often people end up making decisions one at a time, at different times in their lives, with different people, under different circumstances. Having a sound strategy in place will allow you to view your finances with a macro-economic lens vs a micro-economic view. Stay the course and adjust accordingly from a risk and tax standpoint.

RELATED: Financial lessons learned through the pandemic

A great tip for lowering utility bills or car insurance premiums: Simply ask! There may be things you are not aware of that could save you hundreds of dollars every month. You just need to call all of the companies that you do business with to find out about cost-cutting strategies. 

RELATED: Overcome your fear of finances

To learn more about Abrahamsen Financial, click here

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How to Get a Loan Even with Bad Credit

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Sana pwedeng mabura ang bad credit history as quickly and easily as paying off your utility bills, ‘no? Unfortunately, it takes time. And bago mo pa maayos ang bad credit mo, more often than not, kailangan mo na namang mag-avail ng panibagong loan. 

Good thing you can still get a loan even with bad credit, kahit na medyo limited ang options. How do you get a loan if you have bad credit? Alamin sa short guide na ito. 

For more finance tips, visit Moneymax.

 

 

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