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On April 26, 2017, the White House unveiled a plan to provide “tax relief to both our corporations that will help grow jobs, and to middle Americans.” In a briefing, Secretary of the Treasury Steven Mnuchin and Director of the National Economic Council Gary Cohn admitted that the President’s plan takes away a critical benefit for student loan borrowers.
Under the plan, which looks to slash corporate tax rates in an effort to spur a business expansion, the federal tax deduction for interest paid on student loans would be eliminated.
This comes on the heels of well-publicized moves by the U.S. Department of Education to strip away various consumer protections for borrowers in default.
Existing Student Loan Interest Deduction Rules
The student loan interest deduction is one of the few tax benefits that favors the taxpayer with limited income who doesn’t own a home, has no children, and otherwise would be hard-pressed to find a way to lower his or her tax bill.
Under current law, taxpayers with income of less than $80,000 ($160,000 if filing a joint return) can deduct from their taxes the amount paid for interest on qualified student loans. This adjustment to income, available to taxpayers even if they don’t itemize their deductions, can reduce the amount of income subject to tax by up to $2,500 per year.
For interest on the loan to be deductible, it must have been incurred for payment of qualified educational expenses of the taxpayer, his or her spouse, or a dependent. Loans taken from relatives or an employer’s retirement plan don’t count, but the loan doesn’t lose its status if the taxpayer later gets divorced or the dependent becomes self-supporting. A student loan for your child, for example, would qualify even if the child eventually moves out of the house and gets a job of his or her own.
The student must be enrolled at least half-time in a program leading to a degree or certification at a college, university, vocational school, or other postsecondary educational institution eligible to receive federal student loans. Certain educational institutions located outside the United States, as well as institutions conducting internship or residency programs leading to a degree or certificate from an institution of higher education, a hospital, or a health care facility that offers postgraduate training also qualify.
The deduction provides a benefit to millions of taxpayers each year as they try to balance their student loan obligations with the demands of making ends meet. Given the income limitations, it comes as no surprise that the student loan interest deduction is important to people who need the money most.
This is exactly the benefit the Trump tax reform plan seeks to eliminate. But the Administration claims the overall benefit to the middle class will far outweigh the loss of this crucial deduction.
Who Benefits From the Administration’s Plan?
The White House plan doubles the standard deduction from the current $6,350 for single taxpayers and $12,700 for married taxpayers filing joint returns. It also does away with the alternative minimum tax as well as the estate tax. In exchange, all other deductions except those for mortgage interest, charitable giving and retirement savings are eliminated.
There’s no doubt that doubling the standard deduction will help millions of people, effectively giving $24,000 in tax-free money to married couples. But the alternative minimum tax, or AMT, is another story entirely.
AMT is a complex system that requires taxpayers to pay the higher of either their tax calculated under regular income tax rules or their tax calculated under the alternative minimum tax (AMT) rules. Given the way the numbers are calculated, AMT is more likely to hit households with higher incomes. In fact, according to the Tax Policy Center, 30.9% of households with income between $200,000 and $500,000 will be affected by the AMT in 2017. Married couples filing joint tax returns in 2017 will not be subject to AMT at all if their income is below $84,500.
The repeal of the so-called “death tax”, pitched as a tax cut for the middle-class, is also laughable. The IRS currently exempts the first $5.49 million of an estate’s value from taxation (though some states such as Massachusetts and Oregon have a lower limit). The estate tax does not affect people who die with less than $5.49 million worth of assets. In fact, according to the Joint Committee on Taxation, 99.8% of estates owe no estate tax at all. That means only the estates of the wealthiest 0.2 percent of Americans are impacted by estate taxes.
In the end, it’s the wealthy and super-wealthy who benefit from the tax plan.
Guess Who Bears the Tax Burden?
Over 44 million Americans have student loan debt, with average monthly payments at about $350. According to a 2011 analysis of IRS Statistics of Income data performed by the Association of American Universities, over five million taxpayers benefited from the student loan interest deduction.
These are people with income below $80,000, or $160,000 for married couples filing a joint return.
None of these couples will have to worry about estate taxes because not only are they alive (estate taxes are taxes on the estate, not the beneficiaries) but their income is far below the $5.49 million mark. Even those subject to AMT are still able to deduct their student loan interest so long as they fall within income limits.
In other words, the burden imposed by the loss of the student loan interest deduction will be felt by households with more than $24,000 in annual income. The benefits of the new tax proposal, however, will be felt solely by those who make enough money that they would not qualify for the deduction in the first place.
Don’t Want to Lose Your Tax Deduction for Student Loans?
If you think this sounds like a raw deal, now’s the time to contact your Congressional representatives and let them know. Tell them you want them to vote against the 2017 Tax Reform for Economic Growth and American Jobs. Let them know the tax reform proposal will hurt you financially, and that you oppose it.
If you don’t let your elected officials know how you feel about the tax reform, how can you expect them to know?

Learn More Here

• Briefing by Secretary of the Treasury Steven Mnuchin and Director of the National Economic Council Gary Cohn (full text)
• Find Your Representative in the US House of Representatives
• Find Your U.S. Senator
• Instructions for IRS Form 6251, Alternative Minimum Tax
• Student Loan Debt Statistics for 2017, from Student Loan Hero
• Bankrate’s 2017 Tax Guide

The post How Trump’s Tax Reform Plan Will Affect Student Loan Borrowers appeared first on Shaev & Fleischman P.C..

Our firm has defended a number of student loan lawsuits brought by National Collegiate Student Loan Trust over the past 5 years. I’ve also spoken about the company at a number of bar events around the country, and teach graduates of The Student Loan Law Workshop how to understand the issues presented by private student loan entities.
Given how vocal I’ve been about National Collegiate, a LOT of people from around the country have found this site and think our law firm is the right place to serve National Collegiate Student Loan Trust with legal papers. In fact, over the past 5 years some of the things I’ve received include:

• Chapter 13 bankruptcy trustee checks;
• Letters from borrowers addressed to National Collegiate;
• Notice of Commencement of bankruptcy cases filed by people who owe money to National Collegiate;
• Subpoenas to appear in courts around the country on behalf of National Collegiate; and
• Complaints filed by borrowers, consumer protection lawyers, and government entities against National Collegiate.

I Do NOT Represent National Collegiate Student Loan Trust
I am a student loan lawyer who helps people with their student loan problems.
My office defends lawsuits brought by companies such as National Collegiate Student Loan Trust, Navient, and the US Department of Education.
We represent people who need to file for bankruptcy protection.
We help people resolve their federal student loan problems and provide advice about consolidation, rehabilitation, loan forgiveness and discharge, income-dependent repayment options, and other administrative remedies.
We are not National Collegiate Student Loan Trust, and we do not have any connection with this entity. You should not send us any legal papers with the expectation that they will get to National Collegiate.
Where to Send Papers to National Collegiate Student Loan Trust
National Collegiate Student Loan Trust does not have a single office location; rather, the entities are governed and controlled by different companies. I recommend that you send any documents to all of the following places to maximize the likelihood that your mail goes to the right place:
The National Collegiate Student Loan Trust
c/o Wilmington Trust Company
Rodney Square North
1100 N Market St
Wilmington DE 19890
The National Collegiate Student Loan Trust
c/o Goal Structured Solutions, Inc.
402 W Broadway Suite 2000
San Diego, CA 92101
U.S Bank NA, Indenture Trustee
The National Collegiate Student Loan Trust
One Federal Street
3rd Floor Boston, MA 02110
Transworld Systems, Inc.
507 Prudential Road
Horsham PA 19044
Transworld Systems, Inc.
PO Box 15630
Wilmington, DE 19850
Odyssey Education Resources LLC
800 Corporate Drive
Ft. Lauderdale, FL 33334
American Education Services
P.O. Box 2461
Harrisburg, PA 17105-2461
This is the best list that I have right now, but it may be incomplete or incorrect. Do not rely on this list, and don’t get upset with me if any of the addresses are wrong.
You are responsible for tracking down the correct addresses for National Collegiate Student Loan Trust. My goal is to keep my staff from spending more time dealing with misdirected mail.

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The post National Collegiate Student Loan Trust Address appeared first on Shaev & Fleischman LLP.

Our February post on taxi medallions and their significant loss in value generated much reader interest. In this month’s email, we’ll update readers on taxi medallions and related issues.

The New York Post reported earlier this month that a taxi medallion recently sold for $241,000-a new low. As recently as three years ago, taxi medallions were selling for $1,300,000-a drop in value of over 80%.  And there are approximately 50,000 Uber drivers in NYC vs. approximately 13,587 yellow cab drivers.

With just 13,587 yellow cabs on New York City’s streets compared to about 50,000 cars from black cab and app services, New Yorkers now have more transportation options than ever before. In New York City, people took fewer trips and spent less on taxis during the first half of last year compared with 2015, according to a November securities filing from lender Medallion Financial Corp.

According to an article in Skift, 81 percent of Capital One's $690 million in loans for taxi medallions are at risk of default. The share of taxi medallion loans Capital One thinks its borrowers won’t be able to repay in full has nearly tripled over the past year, to 51.5 percent. Another 29 percent of Capital One’s loans are to stressed borrowers who could be at risk of default. And  BankUnited told its investors in November that nearly 59 percent of its loans secured by taxi medallions were under water. Close to 95 percent of BankUnited’s loans were to New York City borrowers.
Many readers have asked us what the banks that loaned money to medallion owners can or are doing. Their options are as follows: 1. Close and go out of business; 2. File for chapter 7 or 11 bankruptcy and liquidate or attempt to reorganize; 3. Sell their non–performing loans to third parties such as hedge funds; 4. Restructure their loans from third parties; 5. Seek capital from third parties; or 6. Work to restructure their loans to medallion owners. Which strategy is optimal? The optimal strategy depends on the facts of each case.

For medallion owners whose loans exceed the value of the medallions, the question remains as to what their strategy should be. The key issue for a medallion owner is whether to continue to own and make payments on a medallion loan, where the value of the medallion is far below the loan balance. For those medallion owners seeking specific advice, please see our post here. Any course of action chosen by a medallion owner involves NYS debtor/creditor law, bankruptcy law and tax law. Medallion owners are advised to seek legal counsel and to proceed with caution.

Many readers have also asked about timing. Assuming the bank or fund that made them the loan is in financial trouble, are they better off negotiating a settlement now or waiting to see what the future holds? This author has negotiated with buyers of distressed debt (defaulted or written off credit card debt) and often those creditors can be more difficult to deal with than banks.

However, in this author’s opinion, taxi medallion prices will continue to decrease in value or remain at these low levels, and taxi medallion owners need to develop a strategy to address these issues based on their own facts and circumstances. To discuss your situation regarding tax medallion ownership, please contact Jim Shenwick.

You should complete your Chapter 13 bankruptcy case before you apply for new credit. You should wait the 3-5 years while the case is running since you are holding off your current creditors. In some cases, a vehicle can be purchased and financed after filing, provided a proper motion is brought before the court which+ Read More
The post Credit After Bankuptcy appeared first on David M. Siegel.