Cohen’s website alone gets at least 200 contacts a month from young Americans caught in what promises to be a lifelong debt trap. Without expert legal advice, many would be doomed to a life of payments they cannot afford, harassing phone calls from debt collectors and no hope of ever repaying the money.
The Institute for College Access and Success estimates that two-thirds of university and college graduates leave school with an average student loan debt of approximately $26,000. About one percent have debts in the six-figure range.
All combined, the student loan debt in the US tops out at over $1 trillion. Although it is difficult to determine, the effect of millions of young Americans making bank loan payments rather than spending on consumer goods and services is believed to have a considerable drag on the economy, and will continue to for many years to come.
Most of the loans were made to students through the federal or the state governments. The rest of the loans were made to students through private lending institutions. Understanding the key differences between these two types of loans is one of Cohen’s strongest points and is critical to finding ways to solve a student debt problem.
“The private side is the scariest,” says Cohen. “The banks have lent huge amounts of money to people. If these loans were for any other purchase, for a house, or car, or any other tangible good, the bank would never, ever lend that amount of money to these people.
“I have a 23-year-old who graduated with a hundred thousand in private student loans and no co-signer. He will never ever pay that loan. His degree is in physical fitness. He is personal trainer at a gym and he makes 30K a year. He won’t even touch the principle on that loan. That’s what I call DOA. So now he is sitting on a default and his credit is garbage,” says Cohen.
“This is very similar to the sub-prime mortgage lending crisis where the banks were giving loans to people that couldn’t actually afford them,” says Cohen. “Fortunately, those people could file for bankruptcy, surrender their house and walk away. But people with private student loan debt are not allowed to do that. Congress needs to change the bankruptcy law so that these are dischargeable.”
The lenders and the debt collection agencies frequently use tactics that drive young borrowers into default. “They tell them ‘here, this is what you owe and this is how much you have to pay every month,” says Cohen. “But the law says the payments have to be affordable and there are ways to make them affordable. I know they are not doing this, because I am bringing suits against debt collectors all the time.”
And Cohen is winning, getting damages for borrowers they will use to pay their loans.
“I have sued debt collectors; I have sued lenders, and guarantee agencies. The only people I haven’t sued is the Department of Education. I am not saying I don’t have plans for it, I just have not found the right case yet,” he adds.
Another approach that Cohen uses for students with large federal debts and in default is getting them into the Income Based Repayment (IBR) program that caps the required monthly payments at an amount based on the borrower’s income and family size.
“The servicers screw up so the borrowers default and the debt collectors screw up so they stay in default. That’s the biggest problem from the federal side. If people just knew about IBR, many people would not default,” says Cohen.
Cohen, one of the few lawyers with these kinds of expertise, now teaches other lawyers across the US how to handle student loan debt issues. It’s a massive economic and social problem.
“I have had more than one person come in and say they were dumped because the person they were dating was afraid to marry them because of their debt load. That’s a real problem if you are a common property state. It’s insane,” he says.
Joshua Cohen is known as The Student Loan Lawyer. He holds a BA from Brandeis University (’96), an MBA from the University of Phoenix (’02), and a JD from Quinnipiac University School of Law (’07). He is based in Cromwell, Connecticut.