Before you pause your student loan payments, consider the risks

Silhouette Portrait of a graduate in cap and gown

 

Yet when your payments resume, they’re often higher because your debt has swelled, thanks to interest.

The Associated Press, citing a 2017 Department of Education audit, reported this week that Navient, one of the country’s largest student loan servicing companies, steered tens of thousands of struggling borrowers into costly delays of their payments, known as “forbearances.”

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The Consumer Financial Protection Bureau alleges that Navient added more than $4 billion in interest to borrowers’ debt through the misuse of forbearances between 2010 and 2015. Navient disputes the allegations in the audit and those by the CFPB.

Despite the fact that putting off payments increases their debt, nearly 70 percent of people who began repaying their student loans in 2013 had their debt in forbearance for some period, according to an April report by the Government Accountability Office.

What else can a borrower do?

Borrowers should first ask whether a deferment is available before they opt for a forbearance, said Bruce McClary, vice president of communications at the National Foundation for Credit Counseling.

That’s because interest does not accrue on subsidized student loans during an economic hardship deferment, for example, as it does with a forbearance. There are also deferments for cancer patients now.

If your difficulty repaying your student loans is unlikely to come to an end any time soon, you might want to enroll in an income-driven repayment plan, which caps your monthly payment at a percentage of your income. Some monthly bills wind up totaling nothing.

Is a forbearance ever a good idea?

Borrowers who find themselves in a short-term difficulty, such as a medical leave or temporary unemployment, might want to consider forbearance, said Mark Kantrowitz, an expert on financial aid and publisher of SavingForCollege.com.

A forbearance typically lasts a year, and borrowers can use the option up to three times.

If possible, however, people should request a partial forbearance and keep up with at least their interest payments during the break.

“This will prevent your loan from growing larger during the forbearance,” Kantrowitz said.

Can I trust my lender?

Given that student loan servicers might not always provide borrowers the best information, it helps to review your options with a nonprofit such as The Institute of Student Loan Advisors, an organization that offers free advice and dispute resolution.

[“source=cnbc”]

As Banks Crack Down On Crypto Companies, This Lithuanian Payments Startup Is Booming

Trakai Island Castle, near Vilnius the capital of Lithuania. Credit: Shutterstock.

Banks including Barclays and Bank of America have taken a hardline when it comes to companies in the cryptocurrency sector.

Bank elsewhere is their message.

Last year hundreds of businesses operating crypto marketplaces, exchanges and trading platforms found their accounts suspended or shut down as banks were unable to vet their cash through standard anti-money laundering procedures.

Even India’s Central Bank has announced it will no longer deal with customers dealing in cryptocurrencies, because of the risks involved.

But elsewhere, banks that back crypto are booming.

Banking elsewhere

In Gibraltar, Poland, Bulgaria, Liechtenstein and Lithuania, the crackdown on crypto has been big news for their more liberal banking landscapes.

One Lithuanian payments provider, Mistertango, this morning revealed a 1,300% year-on-year growth in transactions it handles for client businesses.

Mistertango reported transactions of €1.2 billion ($1.4 billion) on its platform last year, up from €89 million ($103.3 million) in 2016/17.

Credit: Mistertango.

Audrius Ramanauskas, founder of Mistertango.

CEO Audrius Ramanauskas told Forbes that the vast increase was the result of 1,000 crypto marketplace businesses like Coingate, Quoinex and Coinfalcon which had signed up to the service to handle their fiat payments over the last 12 months.

“The last year or so has seen a flurry of banks in the U.S. and the U.K. rushing to ban crypto-related activity for businesses and individuals,” Ramanauskas explained.

Not only is this an overreaction to the potential risks but these banks could indeed be leaving money on the table. The big problem here is a lack of understanding.”

Despite the fears in the mainstream banking sector, Ramanauskas insisted that his company has “exhaustive” KYC (know your customer) and AML (anti-money laundering) checks on all its customers which comply with all of Lithuania’s laws.

Meanwhile, in Gibraltar, the government is in the final stages of passing the world’s first regulations for initial coin offerings, and in Liechtenstein the royal family has been so welcoming to blockchain businesses that companies like Aeternity are flocking to the principality.

“They’re making it really easy to incorporate a cryptocurrency business,” Yanislav Malahov, founder of Aeternity told Forbes earlier this summer.

You can open a company without a bank account, just by using Bitcoin or Ethereum.”

In Ramanauskas’s view, it’s these forward-thinking countries which are set to soar as crypto goes mainstream.

“Acceptance of crypto is not so much a matter of ‘if’ as it is ‘when’. The rise of blockchain technology and the prevalence of cryptocurrency won’t be stifled. It’s the fastest banks and fintechs that will win.”

[“Source-forbes”]