NCLC's Deanne Loonin Discusses Student Debt

The attorney with the National Consumer Law Center (NCLC) answers queries about debt and borrowing.

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This week, we are honored to interview Deanne Loonin, an attorney with the National Consumer Law Center (NCLC) and director of NCLC's Student Loan Borrower Assistance Project. Loonin provides limited direct legal representation to low-income consumers in Massachusetts and consults with other attorneys across the country working with these clients. She is the author of NCLC's Student Loan Law and Guide to Surviving Debt publications and numerous reports on the student loan industry and borrower issues.

What don't most of us understand about how student debt affects low-income borrowers?

Student loan policy is generally developed with a focus on the needs of middle-class borrowers and their families. Although these issues are very important, it is often difficult for those who do not work with low-income populations or who have not experienced poverty to understand the unique issues low-income consumers face.

It is not that low-income consumers make worse decisions than consumers with more money. Rather, they have little or no margin for error when they fail. They can rarely move in with parents or get help from friends and families. A small problem, such as minor car repairs, can spiral into much bigger problems, including delinquent student loan payments.

With that in mind, can you briefly give an example of your clients and the work you do?

Direct representation is one component of our work. Clients generally come to see us after they are in trouble with their federal or private student loan debt. They are often in default.

Here is one client's story: Sharon is a 28-year-old, African-American woman living in Dorchester, Mass., with two children. She incurred a federal student loan balance of about $5,000 to attend a local for-profit beauty school.

Sharon had some absences due to a number of issues, including a fire at her apartment and the birth of her daughter. The school's policy is that students are charged for "make-up" hours. Those charges ballooned to more than $3,000. The school advised Sharon to take out a private student loan to pay off the debt but then refused to readmit her. Unable to find work, Sharon defaulted on both her federal and private loans.

Hoping to attend community college, she decided to consolidate as a way out of default. She applied for Income-Based Repayment (IBR), but was sent a notice stating she had been placed on Income Contingent Repayment (ICR). (See more information on these "forced consolidations.")

Eventually, she was able to get the consolidation loan with an IBR payment of $0. The best news for Sharon is that she has a new start and is attending community college.

As your story illustrates, dealing with student loans can quickly become extremely complicated. What are your suggestions for limiting and dealing with student debt?

There is no "one size fits all" approach. Some clients really want to get back to school as quickly as possible. In those cases, we do our best to help them reach that goal and also discuss the risks of taking out new student loans and refer clients to resources about affordable education options.

Others may have defenses to repayment because of problems with the school or because they were not informed about the loan terms. We evaluate these cases for possible legal claims and discuss individual goals.

We always start by evaluating possible loan cancellation both in and out of bankruptcy. Unfortunately, career-related forgiveness programs like Public Service Loan Forgiveness are rarely relevant for our clients who generally do not work full-time for qualified employers. Cancellations are only available in limited circumstances, so the next step is generally to figure out the best way out of default and into affordable repayment. While many loan holders push rehabilitation, we review the pros and cons of both rehabilitation and consolidation as avenues out of default.

Private student loans are even more difficult because very few private lenders offer meaningful relief.

What are the top three debt reforms you would like to see?

We need to get a broader coalition focused on providing meaningful relief for borrowers. This means eliminating draconian collection policies such as Social Security offsets, tax refund offsets and pushing to restore a statute of limitations for government student loan collections. It also means real bankruptcy relief for all student loan debtors.

We also need to give borrowers more than one chance to get out of default and make sure that the avenues out of default are accessible. We do not advocate a particular model of higher education, but a top priority is to ensure that consumers can get accurate information about schools they hope to attend and that there is relief for those who are harmed by abusive school practices.

What are some resources you provide for people who are having difficulties with their student loans?

We have an extensive website, Student Loan Borrower Assistance, with self-help information to help consumers find out about their options. We cannot provide individualized legal advice, but we answer general questions and provide comprehensive information (including self-help packets). Our book Surviving Debt has information about all types of debt and credit laws and is written for a lay audience. Our treatise Student Loan Law is more technical and especially useful for attorneys and other advocates. We also have legal referral ideas in the "Where to Go for Help" section.

Isaac Bowers is the senior program manager for Educational Debt Relief and Outreach at Equal Justice Works. He was previously an attorney at Shute, Mihaly & Weinberger LLP in San Francisco, where he focused on environmental, land use, and planning issues. A graduate of the New York University School of Law, Bowers also has extensive experience in nonprofit advocacy and outreach.