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Yahoo
a day ago
- Business
- Yahoo
Dave Ramsey on Legal vs Moral Debt Obligations (And Step 1 To Escape Debt You Don't Legally Owe)
Debt is a heavy burden, but when that burden expands beyond what you legally owe — especially when family is involved — it can become emotionally and financially overwhelming. Read More: Consider This: Recently, a caller named Sarah shared her story on Dave Ramsey's show that perfectly illustrates the confusion many face when navigating legal versus moral obligations around debt. Sarah had taken out $85,000 in student loans, including $50,000 in Parent PLUS loans her parents took out on behalf of her and her siblings. Over the past eight years, she has been paying $1,000 a month toward these loans, believing she was steadily paying off her own debt. However, she recently discovered that her parents had combined all the Parent PLUS loans for her and her siblings into one large loan 'pot.' This meant that her payments were being used to cover not only her debt but also her siblings' debt without her explicit consent or agreement. Understandably, Sarah was shocked and felt trapped — she had been diligently paying for years, only to find out she was essentially subsidizing her siblings' debts. She turned to Ramsey for guidance, and his advice will be helpful for anyone in a similar situation. Find Out: Ramsey's first and most important point was clear: A legal obligation is not the same as a moral obligation. Sarah is legally liable only for the debt she personally signed for — the loans in her name. She made a moral commitment to help her parents repay the Parent PLUS loans taken out for her portion of the education costs, but she never agreed to cover her siblings' debts. This distinction is vital because it empowers individuals to set boundaries. While family dynamics and emotions can make it feel like you 'should' pay more, legally, you are responsible only for what you signed. Ramsey emphasized that Sarah has fulfilled her legal obligation, given her consistent payments over eight years. Ramsey says the first step to escaping debt you don't legally owe is to get clear, written documentation of exactly what you owe and what you've paid. This means: Request detailed loan statements showing the original amounts for each borrower. Use online loan calculators to verify how much you've paid versus what remains. Prepare a clear, itemized summary of your payments and remaining balance. Having these numbers on paper is crucial. It removes ambiguity and provides a factual basis for conversations with family members. When you can show exactly what you owe, what you've paid, and what remains, you gain the confidence and clarity to have an informed conversation about expectations and financial obligations. If you suspect you're paying off debt that isn't legally yours, here are the steps you can take to protect yourself: Identify your legal obligations: Review all loan documents and agreements you signed. Understand what debts you are legally responsible for, and distinguish these from debts others may have taken on. Track your payments: Keep a record of all payments you've made toward debts, including dates and amounts. These will help you verify how much you've paid and what remains. Request loan statements: Contact your loan servicers or lenders to get detailed statements showing the current balance, interest rates and payment history for each loan. Calculate your remaining balance: Use online calculators to estimate the amount you still owe, taking into account your payments and interest rates. Communicate clearly and calmly: With your documentation in hand, have an honest conversation with family members or anyone involved. Explain your legal obligations and what you've fulfilled. Set boundaries where necessary. Seek professional advice if needed: If the situation is complex or contentious, consider consulting a financial advisor or attorney who can help clarify your responsibilities and rights. Debt, especially student debt, can feel like a family affair. However, it's important to remember that legal debt and moral debt are two separate things. Ramsey's advice to get the facts, put them in writing, and communicate openly is the first step to escaping debt that isn't yours to bear. Whether it's Parent PLUS loans, co-signed debts or informal family loans, clarity and boundaries are your best tools for financial freedom. If you're in a similar situation, take a deep breath, gather your information and have that tough conversation. You've done your part; now it's time to make sure everyone else does theirs. More From GOBankingRates Surprising Items People Are Stocking Up On Before Tariff Pains Hit: Is It Smart? Clever Ways To Save Money That Actually Work in 2025 This article originally appeared on Dave Ramsey on Legal vs Moral Debt Obligations (And Step 1 To Escape Debt You Don't Legally Owe) Sign in to access your portfolio
The Hill
3 days ago
- Business
- The Hill
Education advocates press Senate for changes to Trump's ‘big, beautiful bill'
House Republicans' 'big, beautiful bill' doubles down on President Trump's education agenda, including raising taxes on university endowments and overhauling the student loan program, even as colleges are already feeling a funding pinch and borrower defaults are on the rise. Advocates are hoping to seize on the opportunity to have the legislation reformed in the Senate, where GOP moderates and conservatives are calling for significant — and sometimes contradictory — changes. Education experts warn that in its current form the package, which also boosts student vouchers and gives a tax break to religious colleges, will financially cripple student loan borrowers and universities alike. 'The major takeaway is that this bill is going to make paying for college and paying off student loans more expensive and more risky for millions of students and working families with student debt,' said Aissa Canchola Bañez, policy director for Student Borrower Protection Center. Student loan borrowers have faced a whirlwind in policy shifts between former President Biden and President Trump, but the current budget reconciliation bill would be an earthquake to the 45 million Americans with student debt. It would reshape repayment options, only offering one income-driven repayment plan or a standard repayment plan; all other options would be terminated. Advocates fear significant increases in monthly payment as more generous repayment plans disappear at a time when default rates are already going up. 'It's very bad for borrowers. I don't want to sugar coat it, you know, it's not looking good,' said Natalia Abrams at the Student Debt Crisis Center. 'It will lengthen the time for undergrads from 20 years to 30 years' to receive debt forgiveness after consistent payments, she added. 'For grad students, from 25 to 30 years. It's really unfortunate that this bill passed, especially by one vote' in the House. The package also intends to end Parent PLUS loans, limit how much federal student loan debt an individual can take out and changes eligibility to Pell Grants. The maximum an undergraduate student could take out is $50,000, with parents able to match the amount. For Pell Grants, the number of credits needed to qualify will increase. Other changes include eliminating subsidized loans. 'One of our big worries is that there will be borrower confusion amidst this return to repayment and with servicers potentially needing to implement, if this reconciliation bill goes through, a new income driven repayment plan that departs significantly from any IDR plan that has come before. And so, I think that borrower confusion is a big problem for policymakers,' said Sameer Gadkaree, president and CEO of the Institute for College Access & Success. Republicans and conservatives have cheered the legislation as a way to simplify student loan repayments and ensure those who did not go to college do not pay off others' debt through their taxes. 'It's time we stopped asking taxpayers to foot the bill for our broken student loan system that has left borrowers in trillions of dollars of debt and has caused college costs to balloon,' said Rep. Tim Walberg (R-Mich.), chairman of the House Committee on Education and the Workforce. 'It's time we stopped asking a factory worker in Michigan or a rancher in Texas to subsidize the student debt of a lawyer in Manhattan. I urge my colleagues in the Senate to end the status quo and get this bill to the president's desk,' he added. Colleges, already beset by the Trump administration, face a financial hit too: tax increases on their endowments ranging from 1 percent to 21 percent, with major universities such as Harvard and Yale at the top end. Those are an addition to the taxes on endowments passed in 2017 during Trump's first administration back. Before then, endowments were never taxed. 'We know that almost 50 percent of endowment spending goes to financial aid. If you add financial aid and academic programs, that's two-thirds of endowment spending, and so, if you take money away from the school, from its endowment resources, it's going to undermine their ability to provide robust financial aid. That's why we call it a scholarship tax, because that's what it is,' said Steven Bloom, assistant vice president of government relations at the American Council on Education. Despite Trump calling for Republicans to unite around the bill, some in the Senate are demanding changes before they'll give it their support. 'I've told them if they'll take the debt ceiling off of it, I'll consider voting for it,' said Sen. Rand Paul (R-Ky.). The infighting has led to some optimism that there is still time to get some changes. 'It seems like folks in the Senate have a bit of heartburn about the level of cuts to the Pell program, and that there might be a discomfort in adopting what the House has put together on that front,' Canchola Bañez said. 'I would hope that senators would look at the ways in which the House proposal will make it significantly harder for folks to afford to repay their loans. And in a world where these policymakers want to ensure that student loan borrowers can repay their debts, we need to make sure that there are actual safeguards in place,' she added.
Yahoo
27-05-2025
- Business
- Yahoo
Thousands of retirees may soon see Social Security checks docked by 15% as Trump admin resumes collections
For millions of older Americans relying on an embattled Social Security system to cover their bills, another financial gut punch may be on the way — and it's coming from their own student debt. Under a Trump administration move to resume collections on federal student loans, borrowers in default could soon see their Social Security benefits docked by as much as 15%, higher education expert Mark Kantrowitz told CNBC. Thanks to Jeff Bezos, you can now become a landlord for as little as $100 — and no, you don't have to deal with tenants or fix freezers. Here's how I'm 49 years old and have nothing saved for retirement — what should I do? Don't panic. Here are 5 of the easiest ways you can catch up (and fast) Nervous about the stock market in 2025? Find out how you can access this $1B private real estate fund (with as little as $10) That means retirees already living on fixed incomes could lose a big chunk of their monthly checks with little warning. And for the hundreds of thousands of borrowers 62 and older who have defaulted student loans — it could be an unhappy surprise in the mail. The government has long had the power to claw back a portion of Social Security benefits to repay defaulted federal student loans. But those collections were paused during the COVID-19 pandemic. The pause was extended under the Biden administration, but President Trump has restarted the clock. The Department of Education recently announced the administration will resume involuntary collections as early as June, meaning borrowers in default could once again be subject to wage garnishments, tax refund seizures and offsets to Social Security checks. And there's a big population at risk. Recent federal data shows that nearly 3 million people over the age of 62 hold federal student loans. The Consumer Financial Protection Bureau says more than 450,000 borrowers in that age group have defaulted on their federal student loans while receiving Social Security benefits. Many of these borrowers are parents who co-signed loans or took out Parent PLUS loans for their children and fell behind after job losses, medical expenses or other financial shocks, according to the National Consumer Law Center. 'Borrowers who receive these notices should not panic,' Nancy Nierman, assistant director of the Education Debt Consumer Assistance Program, told CNBC. 'They should reach out for help as soon as possible.' Read more: This is how American car dealers use the '4-square method' to make big profits off you — and how you can ensure you pay a fair price for all your vehicle costs If you're in default, the federal government can withhold up to 15% of your monthly Social Security benefit without your permission. The offset kicks in automatically, unless you act to stop it. If you get such a notice, it's important to know your entire benefit won't be wiped out. Federal law protects the first $750 per month of Social Security income from garnishment. But for seniors already scraping by, even a small deduction can have a devastating impact. The worst thing you can do is ignore the problem. If you're in default or nearing default, there are steps you can take now to reduce the risk of garnishment. First, you may be able to request a hearing or file a request to stop or reduce the offset. If you're facing medical issues, supporting dependents or already living below the poverty line, you can submit documentation proving financial hardship to the Treasury Department or its debt collection agency. Second, consider reentering good standing through loan rehabilitation or consolidation. These programs allow borrowers to make a series of small payments to bring their loans out of default. Once you're out, you're no longer at risk for Social Security offsets, but you have to act quickly. Loan rehabilitation typically requires nine monthly payments, and the process can take several months. If you're still working and planning to retire soon, Trump's repayment effort should be a wake-up call. Retiring while in student loan default is now risker than ever. For some, it may make sense to delay retirement until the loan is resolved, especially if garnishment would push you below your living threshold. You might also need to rethink your savings strategy. If your retirement income plan was built around a full Social Security check, it's time to reassess. You may need to increase 401(k) or IRA contributions, trim expenses or explore additional income sources to make up the shortfall if garnishment kicks in. And for those still in the workforce with aging loans, now is the time to check your status. Are your loans in good standing? Are you on an income-driven repayment plan? The answers to those questions could make or break your retirement security. Want an extra $1,300,000 when you retire? Dave Ramsey says this 7-step plan 'works every single time' to kill debt, get rich in America — and that 'anyone' can do it Rich, young Americans are ditching the stormy stock market — here are the alternative assets they're banking on instead Robert Kiyosaki warns of a 'Greater Depression' coming to the US — with millions of Americans going poor. But he says these 2 'easy-money' assets will bring in 'great wealth'. How to get in now Here are 5 'must have' items that Americans (almost) always overpay for — and very quickly regret. How many are hurting you? This article provides information only and should not be construed as advice. It is provided without warranty of any kind. Sign in to access your portfolio
Forbes
22-05-2025
- Business
- Forbes
House Votes To Repeal Student Loan Forgiveness And Repayment Plans — 4 Takeaways
WASHINGTON, DC - MAY 21: Speaker of the House Mike Johnson (R-LA) speaks to reporters as he departs ... More for the White House as ongoing negotiations between House leadership, the White House and the House Freedom Caucus on the "One, Big, Beautiful Bill" continue at the U.S. Capitol Building on May 21, 2025 in Washington, DC. The bill includes significant changes to federal student loan forgiveness and repayment plans. (Photo by) Republican lawmakers in the House of Representatives passed sweeping reconciliation legislation early Thursday that, among other things, would repeal several key federal student loan forgiveness and repayment programs and slash more than $300 billion in education-related spending. The bill narrowly passed by a 215 to 214 vote, mostly along party lines. The student loan reforms are part of a broader effort by Congressional Republicans to slash federal spending to help offset the costs of extending expiring tax cuts. 'President Trump's America First agenda is finally here, and we are advancing that today," said House Speaker Mike Johnson (R-LA) shortly after the bill's passage. 'Today we cleared a huge hurdle, and we are one step closer to delivering on our promise to the American people to cut government waste," said Education and Workforce Committee Chairman Tim Walberg (R-MI) in a statement on Thursday. "It's time we stopped asking taxpayers to foot the bill for our broken student loan system that has left borrowers in trillions of dollars of debt and has caused college costs to balloon. It's time we stopped asking a factory worker in Michigan or a rancher in Texas to subsidize the student debt of a lawyer in Manhattan. I urge my colleagues in the Senate to end the status quo and get this bill to the President's desk.' While the reforms to student loan forgiveness and repayment programs are massive in scope, and the House's passage of the legislation is a key step in the process, the bill is not enshrined into law quite yet. Here's what's in the legislation, and what student loan borrowers should know. The reconciliation bill would make major changes to federal student loan forgiveness programs, including: The bill would preserve tax relief for student loan discharges based on a student loan borrower's death or total and permanent disability. The reconciliation legislation would also make significant changes to federal student loan repayment programs, upending decades of precedent. The changes include: The changes would be particularly devastating to Parent PLUS borrowers. Most Parent PLUS borrowers not already enrolled in the ICR plan would be effectively cut off from any income-driven repayment plan and most pathways to student loan forgiveness, including through PSLF. The Republican bill would also make major reforms to the disbursement of federal aid. The legislation would phase out or severely limit the Graduate PLUS and Parent PLUS programs, which advocacy groups argue would force many families to rely more on private student loans. Private student loans generally have fewer consumer protections and more limited repayment options. The bill would also make major changes to Pell Grant disbursements, which some advocates have argued would limit higher education accessibility to lower-income students and families. Pell Grants are a form of federal student aid that does not have to be repaid. While the passage of the reconciliation bill by the House of Representatives was a key step in the process of the bill becoming law, it's not a done deal yet. Now the bill heads to the Senate, where Republican lawmakers could make changes to the legislation's provisions. But it's unclear whether Republican senators will scale back the provisions impacting student loan forgiveness and repayment programs. 'Comprehensive reform of higher education is needed,' said Senator Bill Cassidy (R-LA), chair of the Senate Health, Education, Labor, and Pensions Committee President in remarks on the Senate floor on Wednesday. 'Trump and Secretary McMahon are making progress, including fixing our broken student loan program. But, congressional action is needed to create lasting change.' Cassidy pointed to pending legislation in the Senate to repeal the SAVE plan, eliminate the Graduate PLUS program, and eliminate most existing income-driven repayment plan options – all of which are elements of the House version of the bill that Republican lawmakers passed early Thursday. Student loan borrower advocacy organizations slammed the legislation. 'Rather than check the abuses of the executive branch, Congressional Republicans appear ready to abuse the reconciliation process to rewrite higher education policy—shrinking access to federal financial aid, cutting or eliminating grants for about two-thirds of Pell recipients, removing guardrails that protect students from predatory schools, and placing enormous pressure on state higher education budgets," said Mike Pierce, executive director of Student Borrower Protection Center, in a statement during a Senate Committee on Health, Education, Labor, and Pensions hearing on Wednesday. 'The result will push millions of families into the private loan market and, in the same bill, gut the CFPB—the regulator charged with protecting these very same families.' All eyes are now on the Senate as lawmakers evaluate whether to change the provisions of the House bill that would make significant reforms to federal student loan forgiveness and repayment plans.
Yahoo
21-05-2025
- Business
- Yahoo
After Paying Off Her Own Student Loans To The Tune Of $96,000, A Dave Ramsey Caller Says Her Parents Expect Her To Cover Her Siblings' Debt
A recent caller to 'The Dave Ramsey Show' sparked a conversation that hits close to home for many borrowers: what happens when a personal loan becomes a family burden? Sarah, 29, called into the show to share that she had racked up $85,000 in student loans under her name and another $50,000 through Parent PLUS loans taken out by her parents. "I did tell my parents, of course, I would help them pay off whatever they put into their name," she said. And for nearly eight years, she did just that — working hard and throwing $1,000 a month at the debt. "So I have no debt legally in my name," she told Dave Ramsey. Don't Miss: Hasbro, MGM, and Skechers trust this AI marketing firm — Deloitte's fastest-growing software company partners with Amazon, Walmart & Target – But when she recently told her parents she was about to wrap up her part and really focus on the final stretch, she was blindsided. "They kind of told me that they combined my loans and my siblings' Parent PLUS loans that they took out for them into one big student loans pot," Sarah said. That meant she hadn't just been paying off her own share; she'd unknowingly been contributing toward her siblings' debts too. "I don't know what to do." Dave spoke plainly. "You don't have any legal obligation at all," he said. "You do have a moral obligation because you promised to pay your part, but you did not promise to pay your siblings' part. Correct?" "Correct," Sarah replied. Trending: Maker of the $60,000 foldable home has 3 factory buildings, 600+ houses built, and big plans to solve housing — When she explained that she had been sending $1,000 a month for nearly eight years. That's $96,000. What he would say to the parents is, 'I paid in $96,000, including interest. That means I don't owe anymore. Sorry, Mom and Dad. The rest of it is on you and bro. I did my part." Dave emphasized that while it might be a tough conversation, it's a necessary one. "Mom and Dad, here's the deal: I did not promise to pay anyone else's loans," he said. "Mine was $60,000 at 7%, and with $1,000 a month for 8 years, the remaining balance would be zero." Sarah admitted it would be difficult. "Only because, like, they've done a lot of other things for me, you know?" But Ramsey responded plainly: "They changed your diaper, but you don't have to pay them for that. That's called being a parent." According to Dave, most calls about Parent PLUS loans involve angry parents who are stuck holding the bill. In this case, he said, "mom and dad are the ones that stepped in it." "Well done, Sarah," co-host Rachel Cruze added. "Morally, you've done everything to the T." Read Next: Nancy Pelosi Invested $5 Million In An AI Company Last Year — Invest where it hurts — and help millions heal:.Up Next: Transform your trading with Benzinga Edge's one-of-a-kind market trade ideas and tools. Click now to access unique insights that can set you ahead in today's competitive market. Get the latest stock analysis from Benzinga? APPLE (AAPL): Free Stock Analysis Report TESLA (TSLA): Free Stock Analysis Report This article After Paying Off Her Own Student Loans To The Tune Of $96,000, A Dave Ramsey Caller Says Her Parents Expect Her To Cover Her Siblings' Debt originally appeared on © 2025 Benzinga does not provide investment advice. All rights reserved. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
