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California DFPI Issues License to First In…

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Student Loan Update: California DFPI Issues License to First Income Share Agreements Servicer

The California Department of Financial Protection and Innovation (DFPI) has signed an agreement with New York-based Meratas Inc., a company that partners with educational institutions to offer students income share agreements (ISAs) to finance post-secondary education and training, according to a news release from the DFPI.

The agreement reflects the department’s decision to treat these private financing products as student loans for the purpose of the California Student Loan Servicing Act (SLSA), which was passed in 2016.

“Today’s action shows we are taking significant steps to better protect California student borrowers,” said DFPI Senior Deputy Commissioner Suzanne Martindale, whose Consumer Financial Protection Division oversees the student loan servicing law. “Regulating income share agreements like student loans levels the playing field and creates a fair marketplace that protects all consumers.”

The agreement between DFPI and Meratas is believed to be the first of its kind to require an ISA servicer to follow state licensing and regulation. “Regulating an ISA servicer under the SLSA better protects California students by ensuring the company submits to regular examinations and communicates honestly and fairly with borrowers, amongst many other protections,” the DFPI reports.

ISAs are increasingly used by private, for-profit companies offering post-secondary education and nonprofit training programs. Under an ISA, students agree to repay a school a set percentage of their future gross income after graduation, but only if they are employed and making more than an agreed-upon salary.

Meratas applied for a license in April, which led to an agreement that the DFPI will issue the company a conditional license under the SLSA.

For years, some ISA issuers have contended that state and federal lending laws do not apply to the agreements, and students who finance education under the agreements did not enjoy the same regulatory protections as other borrowers, according to the DFPI.

The DFPI expects to clarify requirements for ISA providers and servicers through future rulemaking.

In addition to regulating student loan servicers, the DFPI licenses and regulates financial products and services, debt collectors, credit repair and consumer credit reporting agencies, debt-relief companies and more.

Debt collector license applications are new to California under the Debt Collection Licensing Act passed last year. The license applications will be online through the Nationwide Multistate Licensing System & Registry Sept. 1. Applications will be due by Dec. 31, 2021, and required starting Jan. 1, 2022, ACA International previously reported.

Meanwhile, at the federal level, the U.S. Department of Education (DOE) has released updated information on the balance between federal and state oversight of student loan servicers.

“A new legal interpretation that revises and clarifies [the department’s] position on the legality of state laws and regulations that govern various aspects of the servicing of federal student loans … will help states enforce borrower bills of rights or other similar laws to address issues with servicing of federal student loans,” according to a news release from the DOE.

In July, the Conference of State Bank Supervisors and North American Collection Agency Regulatory Association issued a letter to Education Secretary Miguel Cardona applauding recent steps by the DOE toward recognizing state authority but calling for more action to stop preemption over state regulation, ACA previously reported.

According to the DOE, “the proposed notice clarifies that while federal law does preempt state regulation in certain narrow areas, states can regulate student loan servicing in many other ways without being preempted by the federal Higher Education Act (HEA).”

The interpretation notice took effect Aug. 12, but the department is also seeking public comment on the notice until Sept. 13 so it can identify any additional changes that may be needed, according to a notice in the Federal Register.

Federal student loan payments are currently on hold through Jan. 31, 2022. The extension was recently updated to go into next year and the DOE reports it is the final extension of the payment forbearance.

The state regulators who called for rescinding the preemption policy said it is important to do it now to ensure borrower protections once the payments resume.

To file comments using Docket ID ED-2021-OS-0107:

  • Go to www.regulations.gov to submit your comments electronically. Information on using Regulations.gov, including instructions for accessing agency documents, submitting comments and viewing the docket, is available on the site under the FAQ.
  • Postal Mail, Commercial Delivery or Hand Delivery: If you mail or deliver your comments about the interpretation, address them to Beth Grebeldinger, U.S. Department of Education, Federal Student Aid, 830 First Street NE, Room 113F4, Washington, D.C. 20202.

For more information on how the ACA licensing staff can assist with your licensing application completion needs, please contact us at licensing@acainternational.org or call (952) 926-6547.

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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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