Law360, “Federal Vs. State: The Fight To Regulate Student Loans”

Joseph Cioffi and James Serritella discuss the heavyweight fight brewing between federal and state authorities over whose rules should govern the servicing of student loans in their latest article published in Law360. In “Federal Vs. State: The Fight To Regulate Student Loans,” the authors note that the battle appears headed for the courts, where the outcome will likely depend upon judicial interpretation of the preemption doctrine.  To read the full article, click here.

College students – prepare to be educated on a new case of Hobson’s choice, a term typically used to describe situations where there appears to be a choice available, but in reality, there is no choice at all.  It’s named after a stable owner in England who rented out horses, but would only offer customers the horse nearest the stable door.  But this time around, the concept is reflected in a proposed bill that would offer student loan borrowers debt elimination in exchange for delaying their Social Security qualifying age.  Whether they take the deal or continue to repay their loans in full,…

For all the talk about Dreamers in the national immigration debate, a recent research paper positing the positive effect of erasing the nation’s $1.3 trillion student debt burden has given the term new meaning.  If someone could wave a magic wand and make student loan debt disappear, we would hear the collective cheers of student borrowers all the way to the moon.  But rather than treat such an act like a fairy tale, a group of economists here on earth went about determining the kind of economic impact a massive cancellation of student debt would have.  …

2018 may be the beginning of the end of an education finance system that has resulted in overburdened students and families struggling to pay back loans that were too high at their inception relative to the reasonable income potential of the degree earned. Change won’t come overnight, but potential solutions should be put in motion this year, mainly aimed at relieving the student loan debt burden.

Below are a few touchstones for change that would signal the beginning of the end of the current student debt cycle.

New Laws

Under the proposed Promoting Real Opportunity,…

Originations and Issuances, by the Numbers

Student loan debt rose to $1.34 trillion in Q2 2017, up from $1.31 trillion at the end of 2016, and now accounts for 10.4% of the $12.8 trillion in total household debt.

In Q2 2017, $3.3 billion in student loan asset-backed securities (SLABS) were issued, down 34% versus year ago. Of the total first half 2017 SLABS issuance of $7.9 billion, student loan refinance (refi) ABS issuances were $2.3 billion, a 30% increase versus year ago. Traditional private SLABS issuances accounted for $0.8 billion, a 54% decrease versus year ago….

Years ago, “show me the note” contagion took hold in the subprime mortgage market. Borrowers launched widespread attacks on foreclosure actions once tales of successful early challenges were reported in the media.  With the recent reports in The New York Times about National Collegiate Student Loan Trusts’ problems enforcing student loans due to incomplete documentation, the same contagion could again take hold in the nation’s courts.

In the aftermath of the 2008 financial crisis, courts were filled with cases in which borrowers made the technical argument that the securitization trustee trying to foreclose never actually received the relevant note and mortgage—and in some cases,…