Subprime Lending News 8/2/17:
Public sector borrowers might not be able to count on student loan forgiveness, auto industry takes a hit, and how to get the most out of your credit card.
By Caroline Thompson
Public Service Loan Forgiveness Program at center of new lawsuit.
In 2007, the Bush administration put into place a loan forgiveness program intended to encourage college grads to pursue careers in education, public service and non-profits. Graduates who submitted annual proof of employment and made 10 years of on-time monthly payments were to have their remaining federal loan balances forgiven, but a lawsuit filed this week is alleging that the Department of Education may have mislead graduates about whether or not they qualify for the program. According to the Department of Education, the company overseeing the federal program, FedLoan Servicing, cannot be relied on to accurately tell borrowers whether or not their loans will be forgiven. But the company has, for nearly 10 years, been issuing assurances to borrowers that they qualify. The four borrowers at the center of the lawsuit are suing after the department, alleging the eligibility requirements were suddenly changed. According to an article from the Washington Post: “Each had submitted a certification form verifying their employment that FedLoan approved but was later informed that their work as lawyers did not qualify for the program.”
“Thousands of young people—teachers, engineers, lawyers, doctors and more—made major life decisions based on inaccurate information provided by the department and its contractor,” said Linda A. Klein, president of the American Bar Association, told the Washington Post. “They took jobs and moved their lives based on this information. The plaintiffs followed the rules and are now paying a steep price for the department’s mistakes.”
Getting the most out of your credit card isn’t as hard as you think.
It’s one thing to have a credit card of two in your wallet, but if you’re not using that plastic to your advantage, you’re missing out on some serious benefits. A new article in CNN Money lays out five major ways Millennials are getting credit wrong. Many young people are avoiding credit cards altogether, which will have a negative impact on their credit in the long run. According to Laura Sanicola of CNN Money, the best way to use credit cards is to pay them off every month, sign up for cards from several companies, avoid high-interest store cards, and don’t cancel cards, even if you don’t use them—because the more accounts you have open, the better your credit score will be. For an in-depth look at how to avoid bad credit and improve your financial outlook, check out the full article here.
Auto sales from “big three” U.S. companies take a sharp decline
July was a bad month for General Motors, Ford Motor Company and Fiat Chrysler Automobiles. While the three largest American automotive companies all expected to end the month at a loss, the sales declines were worse than anticipated. GM, which had forecasted an 8 percent drop in sales, was hit with a 15 percent drop in sales. Ford expected to be 5.5 percent down, but saw a 7.4 percent decline instead. Fiat Chrysler was down 10.5 percent, after predicting just a 6.1 percent sales hit. Auto sales have fallen every single month this year, despite the growing auto-loan market, which has been unfavorably compared to the subprime lending boom of the early 2000s, a practice that largely drove the 2008 financial crisis.