Thread: $22B Shortfall Found in Obama Administration’s 2014 Student Loan Program

Topic - the President. Trying to buy back the youth vote?

$22B Shortfall Found in Obama Administration’s 2014 Student Loan Program

BY: Caroline Lee Smith
February 6, 2015 12:41 pm

The Obama administration’s student loan program had a shortfall of nearly $22 billion in 2014–the largest of any government credit program in history.

Politico reported Thursday that the shortfall comes from Obama’s debt relief offered to borrowers with large student debt.

For more than two decades, budget analysts have recalculated the projected costs of about 120 credit programs every year, but they have never lowered their expectations of repayments this dramatically. The $21.8 billion revision—larger than the annual budget for NASA, or the Interior Department and EPA combined—will be tacked onto the federal deficit.

The 40 million Americans with student loans are now saddled with more than $1.2 trillion in outstanding debt. And with higher education costs rising much faster than inflation, the already massive program has been growing at a spectacular clip; direct government loans alone increased 44 percent over the last two years despite an aura of austerity in Washington.

The Obama administration has tried to ease the burden for some borrowers by reducing their payments to 10 percent of their income and forgiving their loans after 20 years; this year, the Education Department plans to make all borrowers eligible for that “pay-as-you-earn” relief.

All of that shortfall will be added to the national deficit, and because of “a quirk in the budget process for credit programs, the department can add the $21.8 billion to the deficit automatically, without seeking appropriations or even approval from Congress.”

The ever-deluded administration is convinced that there will not be a shortfall, though–compared to the Department of Education’s $740 billion in loans, the $22 billion shortfall is a drop in the bucket.

But administration officials said there’s no reason to think this year’s shortfall will recur. They believe that their budgets going forward will accurately reflect their new efforts to help borrowers limit their payments, that pay-as-you-earn will be “baked into the cake.” Historically, re-estimates for the better and for the worse have tended to cancel each other out across the government.

In fact, this year, the government’s credit portfolio increased to $3.3 trillion, larger than any U.S. bank’s, but the re-estimates for all the programs besides student loans netted out to less than $1 billion.

http://freebeacon.com/politics/22b-s...-loan-program/

The student loan program is really in a mess because the interest rates are much too high for students to be able to reasonably pay them off. They're too young and inexperienced when they take them out to know that. They just assume things will work out but as so often is the case, things don't go as planned. When we were in college, the interest rate was almost nothing on student loans and tuition and the cost of housing and so forth were much lower as a % of income. Things are very much out of balance, almost everywhere we look. We have to fix these things and to do that we have to get the government out of as much of it as possible, because far too many in our government are rigging the system and our institutions to ensure that Americans don't get ahead, that they don't succeed, that they bankrupt before they're 30. If Americans want to fix it, we certainly can, but to do so we have to reverse the policies that caused this disaster.

Food for thought on reversing the policies that caused this disaster:

Judy's Five Steps to Fix the US Economy:

1. stop illegal immigration and reduce legal immigration
2. pass the FairTax
3. restore protected or "fair" trade policies
4. legalize/regulate/educate/tax the illegal drug trade
5. drill baby drill, but do it right

Try it, you'll like it.

Originally Posted by Judy

Food for thought on reversing the policies that caused this disaster:

Judy's Five Steps to Fix the US Economy:

1. stop illegal immigration and reduce legal immigration
2. pass the FairTax
3. restore protected or "fair" trade policies
4. legalize/regulate/educate/tax the illegal drug trade
5. drill baby drill, but do it right

Try it, you'll like it.

I would certainly have a serious problem with number 2 and 4! Of course you already know that because we've had many discussions on the unfair tax plan and the legalization of drugs many times before. It's all been said, so please don't feel obligated to respond.

Originally Posted by MW

I would certainly have a serious problem with number 2 and 4! Of course you already know that because we've had many discussions on the unfair tax plan and the legalization of drugs many times before. It's all been said, so please don't feel obligated to respond.

Well, there is a couple of points I'd like to make that if I have made them, it's been a long time about 2 and 4. So, I'll just take a couple of minutes to make them here. When we set out to fix an economy, we have to reverse the policies that caused the failure and the income tax and the War on Drugs are 2 authoritarian government mandates that are part of the failure, and they are a very significant part of that failure.

The income tax costs US taxpayers, individuals and businesses over $300 billion a year in compliance costs and lost productivity. Every decade that's $3 trillion in lost economic productivity, never to be recouped, never to be regained, never to be found, which means we'd be just as well off to take this $3 trillion and put it on a bonfire and burn it.

The War on Drugs costs our economy over $300 billion a year, money that flies out of the country never to be recouped, never to be regained, never to be found, which like the income tax means we'd be just as well off to take that $3 trillion add it to the $3 trillion the income tax costs us and burn them both together on a big bonfire.

That's $600 billion a year, the entire cost of our public education system for K-12, or $6 trillion every decade of lost economy, which is the net straight-up cost, before this money would otherwise be invested in our economy on production which when circulated through the economy on production multiplies by a factor of 6, creating jobs, higher wages, better benefits, more disposable income, more savings, more investment, more retirement, more security, more peace of mind, and grows the economy in amazing and beneficial ways improving the lives, well-being and standard of living for all Americans.

Freedom is a terrible thing to waste which is what the income tax and the War on Drugs have done to our people and our economy for no benefits in return which is why eliminating these infringements altogether is essential to fixing the US economy.

Another thought on 2 and 4. We earn enough through eliminating these infringements on liberty to pay for public education K-12 without property taxes. Imagine how much cheaper and easier it would be for all homeowners and property owners to be able to eliminate property taxes. Think about the millions of people who struggle to meet their mortgage payments only to face property tax costs that are another 20% to 30%. Think about rents that are 20% to 30% higher than they would otherwise be because of property taxes. Think about the millions of people who lose their property because they can't afford the property taxes even after they've paid off their mortgage.

It's time to start fixing our economy in ways that fix the problems. Americans should never have to face the problem of losing their home, property or freedom over taxation and recreational drugs. How can Americans be free in a system like that? We can't be free or sustainable in a system like that.

When the FairTax passes at the federal level, the states and communities will start converting their state and local taxes to a FairTax type system eliminating their own state income and local property taxes and with the five steps we've taken to fix our economy, there will be plenty of consumption and FairTaxes to pay for all government funded or supported activities through the natural course of voluntary consumption without authoritarian mandates and infringements on liberty, property or income.

Judy wrote:

When the FairTax passes at the federal level

Don't hold your breath because the UnfairTax plan is not going to happen in its current form. Well, at least it's fair to say you or I won't be around to see it happen. The UnfairTax plan you keep touting will create more problems than it solves. The only reason it has any support at all is because it help many in the Congress protect their wealth. It's just isn't the solution, nor is legalizing drugs. Where legalizing drugs is concerned, the cost be damned, we're talking about our grandchildren and future generations of children's well-being! I use the same argument against those who apeak of the potential economic gains to legalizing millions of illegal aliens. Hey, some things are just more important than money!

When the FairTax passes at the federal level, the states and communities will start converting their state and local taxes to a FairTax type system eliminating their own state income and local property taxes and with the five steps we've taken to fix our economy, there will be plenty of consumption and FairTaxes to pay for all government funded or supported activities through the natural course of voluntary consumption without authoritarian mandates and infringements on liberty, property or income.

Glad to see you have so much trust and faith in your government. You're making a lot of assumptions in this statement that may or may not come to fruition.

Originally Posted by MW

MW wrote:



Don't hold your breath because the UnfairTax plan is not going to happen in its current form. Well, at least it's fair to say you or I won't be around to see it happen. The UnfairTax plan you keep touting will create more problems than it solves. The only reason it has any support at all is because it help many in the Congress protect their wealth. It's just isn't the solution, nor is legalizing drugs. Where legalizing drugs is concerned, the cost be damned, we're talking about our grandchildren and future generations of children's well-being! I use the same argument against those who apeak of the potential economic gains to legalizing millions of illegal aliens. Hey, some things are just more important than money!



Glad to see you have so much trust and faith in your government. You're making a lot of assumptions in this statement that may or may not come to fruition.

Drug legalization would not legalize drugs for children. The regulations would still ban use or purchase by or for minors. There would just be civil fines and civil action for violators instead of criminal penalties. That way if your children or grandchildren who are minors somehow got involved with drugs, they would face civil resolutions including rehab and counseling instead of being sent up to the slammer with Bubba and have felony records. Most parents and families would prefer this route of civil regulation for their children. One of the biggest reasons if not the sole reason we have illegal immigration is because of the foreign drug cartels who need a steady stream of illegal aliens and an open border to funnel their drugs in and haul our money out. Under drug legalization, the regulations should require that only US citizens can own and operate any aspect of the legal drug business here in the states from field to production to sales and should prohibit imports. This cuts off the foreign cartels from our market, shuts them down with respect to our market, and eliminates their using our money to buy up our politicians to keep illegal immigration flowing and our borders open.

I have almost no faith or trust in our governments. However, I have enormous trust in the common sense of the American People who once the FairTax passes at the federal level will demand that the same type of tax system be deployed in the states and counties. In fact, some are already trying to pass FairTax type tax systems in the states. The tax industry lobby is huge and very hard to defeat, but we will.

You'll see, and when we do, you'll be a beneficiary right along with every other American. Of course there will be some who lose under the FairTax, it will by and large shut down the income tax industry and those who work in it, but they can just count their blessings for having enjoyed the billions they've collected off the misery of US taxpayers dealing with an income tax mandate for more than a century, turn their investments and efforts to real production elsewhere, and look for new jobs in our thriving economy.

An example of the companies behind the anti-FairTax lobby that claims the greatest tax system ever presented to the American people is "Unfair":

H&R Block:

Annual Revenue: $3.04 Billion
Total Assets: $4.6 Billion

Controversies

H&R Block's own taxes

In August 2005, H&R Block announced that it had overstated its earnings for 2003 and 2004 by $91.1 million. The company stated that it had "insufficient resources" to identify and report complex transactions in its corporate tax accounting. On February 23, 2006, the company said in its quarterly results that it had miscalculated its own state income taxes for 2005 and 2004, and that it owed an additional $32 million in back taxes. That mistake, plus Block's lower-than-expected earnings for the quarter, caused its stock price to drop by 8.5 percent in one day. At April 30, 2008, the company's liability recorded for "uncertain tax positions" totaled $137.6 million (excluding related interest and penalties). According to H&R Block, "This liability represents an estimate of tax positions we have taken in our tax returns that may ultimately not be sustained upon examination by the tax authorities." Estimated gross interest and penalties relating to these potential assessments totaled an additional $47.5 million.^[10][11] Refund anticipation loans

On Feb. 15, 2006, California Attorney General Bill Lockyer sued H&R Block, alleging the company's refund anticipation loan (RAL) business violated state and federal laws in its marketing and providing of high-cost RALs mainly to low-income clients. Block responded that it "believes the refund lending program is both fair and legal, and will vigorously defend against the complaint". On January 2, 2009, California Attorney General Edmund G. Brown Jr. reached a $4.85 million settlement with H&R Block, which prohibits the company from deceptively marketing high-cost refund anticipation loans as early "tax refunds". Consumers received up to $2.45 million in restitution if they purchased a "refund anticipation loan" or a "refund anticipation check" through H&R Block between January 1, 2001 and December 31, 2008. In addition, H&R Block agreed to pay $500,000 in penalties and $1.9 million in fees and costs.^[12][13] In 2011, H&R Block ceased offering RALs altogether, a move praised by consumer rights activists.^[14]

Express IRA

On March 16, 2006, New York Attorney General Eliot Spitzer sued H&R Block, accusing the company of deceptive marketing of its Express IRA retirement accounts. The lawsuit alleged the company assessed fees, including set-up fees, annual fees, and account closing fees that, for 85% of account holders, resulted in the account losing money.^[15] However, in July 2007, a New York state judge dismissed much of the lawsuit.^[16] Justice Karla Moskowitz of the State Supreme Court excused Block and five of its units from the lawsuit. She let stand the portion of the complaint concerning another unit, H&R Block Financial Advisers, but dismissed allegations of common law fraud. At the time of the ruling, Block said it believed the remaining assertions lacked merit and that it would appeal. On January 6, 2009, a New York state appeals court overruled trial justice Karla Moskowitz's July 2007 ruling and reinstated the lawsuit against H&R Block Inc that accused the company of fraudulently marketing Express IRA retirement accounts to hundreds of thousands of lower-income clients nationwide.^[17] The matter was settled in 2009.

Social Security numbers

In December 2005, H&R Block sent its customers free copies of its TaxCut software, but the mailing labels on the packages mistakenly included the recipients' Social Security numbers. Block said it sent the promotional mailing to former customers and people whose names were taken from purchased lists. The company said it is legally required to hold on to customers' tax information, including Social Security numbers, for three years. Block said no customer data has been lost or stolen as a result of the mistake, and that less than 3 percent of the mailings were involved.^[18]

http://en.wikipedia.org/wiki/H%26R_Block

Oh, and they have a PTIN, certified tax preparer number issued by the IRS.

This is an example of how the anti-FairTax tax industry lobby looks out for the "poor" and low-income clients. This is why they hate the FairTax because it removes them from the lives of Americans, gets their crooked money-sapping noses out of the private lives and affairs of US taxpayers, shuts them down, and forces them to take the billions and billions they've already earned off the backs of American workers and earners for more than a century and do something real with their money, hopefully something positive, something that produces a needed desired and innovative product or service, instead of earning billions a year off the misery and cost of compliance with evil government income tax mandates, which they themselves can't even abide.

That's Block, the largest tax preparer by a mile in the US. Here's Jackson Hewitt, the second largest tax preparer in the US:

http://en.wikipedia.org/wiki/Jackson_Hewitt

(Jackson Hewitt) Default:

In May 2009, the company negotiated out of a default on its debt and technically defaulted for several days in May 2010 (although an agreement with creditors was announced within one week of the "default").^[9]

On May 4, 2011, the company announced it had agreed to a twenty-day extension of its debt under its various credit agreements with Wachovia/Wells Fargo Bank. The company mentioned at that time that it was considering many options including a prepackaged bankruptcy filing. On May 20, 2011, the extension expired and the company had yet to file for bankruptcy protection or to announce another extension of its debt.

On May 7, 2011, Jackson Hewitt ceased being traded on the New York Stock Exchange. The ending share price was $.19. On May 9, 2011, its stock symbol was changed from JTX to JHTX and began trading on a different stock exchange.^{[clarification needed]} On May 24, 2011, Jackson Hewitt officially filed for bankruptcy.^[10]

In August 2011, Jackson Hewitt became a privately held company with Philip Sanford as its president, chief executive officer and a member of the board of directors.

(Jackson Hewitt) Investigations:

On April 3, 2007, the United States Justice Department announced that the federal government had filed civil injunction suits alleging tax fraud by five corporations owned or partly owned by Farrukh Sohail. According to the four lawsuits filed in federal courts in Chicago, Atlanta, Detroit and Raleigh, the corporations operate under franchise agreements with Jackson Hewitt Tax Services Inc.^[11]

On September 28, 2007, the Department of Justice announced that it had reached settlements with each of the defendants in the case. Under the settlement agreements, the majority owner, Farrukh Sohail, of each of the businesses was to be barred from preparing tax returns for five years,^[12][13] and roughly fifteen of Sohail's employees were permanently enjoined from preparing tax returns. Neither Sohail nor his incorporated businesses were to pay any financial penalties under the settlement agreement, indicating that the fraud committed was not done with the consent of senior management in Sohail's business.^{[citation needed]}


On September 6, 2007, Jackson Hewitt said that its internal review found no evidence its employees knew of the scheme that led to U.S. Department of Justice lawsuits. The internal review, led by former IRS Commissioner Fred Goldberg: "...did not find evidence of corporate employee participation in, or knowledge of, the allegedly fraudulent tax return preparation activities."^[12]

These are the people you want to open your lives to? Answer all their questions? Provide them with all your papers? Give them all your personal information? Really?!

We can't fix this disaster without reversing all the major policies that caused it, and that includes abolishing the income tax and replacing it with a consumption tax, which is a retail sales tax on new goods and services, known as the FairTax which also offers a rebate for any citizen or permanent legal resident who wants to sign up for it to cover the FairTax costs on essentials up to the poverty line.

So just remember when you see "Unfairtax", that's the talking point of the crooks who line their pockets with the fees charged to US taxpayers for filing tax returns who then use the data you provide them to line their pockets again, companies that can't pay their mortgages, who consider bankruptcy to cheat their lenders, who commit fraud, take advantage of the poor and low-income people, and who can't even figure out how to comply themselves with federal and state income tax regulations.

Shut Them Down. Set Yourselves Free. FairTax Now!

www.fairtax.org

And here's another one, the 4th largest tax preparation company in the US, Instant Tax Service:

http://www.forbes.com/sites/kellyphi...-down-by-feds/

11/10/2013 @ 11:06PM 52,007 views

Fourth Largest Tax Prep Business In The Country Shut Down By Feds

Comment Now Follow Comments



Closed (Photo credit: runran)




Instant Tax Service (“ITS”), the fourth-largest tax preparation business in the United States, has been ordered by a federal court judge to shut down its operations.


U.S. District Judge Timothy S. Black found that ITS had a culture of “fraud and deception.” The order, which was quite extraordinary, was said to be “necessary to protect the public and the Treasury.”


According to the complaint (downloads as a pdf), ITS engaged in a pattern of false and deceptive practices in all facets of its operations – from marketing the franchises to the preparation of returns and the offering of loan products.
ITS marketed its franchises to practically anyone who could afford to pay the fees, no matter whether they were otherwise qualified. According to the complaint, ITS touted its franchise to potential owners as so simple that, “[n]o tax experience [is] necessary!” ITS claimed that it would train franchisees all they needed to know: they received just seven hours of training related to tax instruction. ITS also ignored its own background checks, setting up a franchise in at least one case with a known felon.


It’s alleged that franchisees did what ever it took to maximize charges to customers. The complaint further charges that ITS tacked on a number of junk fees to its invoices including bogus charges for “service bureau,” “document preparation,” “refund estimate,” “technology/software,” “account set up,” “check printing,” and “Efile/electronic transmission.” Those fees, together with tax prep fees pushed charges to an average of $400–$500 per return; fees could run “as high as $1,000 or more for as little as 15 minutes of return preparation.” Franchisees were accused of failing to disclose all fees and increasing fees without the customer’s consent; often, customers never know the total amount of fees charged because their fees were deducted from the taxpayer’s refund check – without explanation – before the check was made available.


Many of the questionable fees were related to loan products such as Instant Cash Loans (ICLs) and Refund Anticipation Loans (RALs), marketed to ITS customers. Those products were run through Tax Tree, LLC, which is owned by Fesum Ogbazion, who also owns Instant Tax Service, even though customers are given the impression that Tax Tree is an independent, third-party lender.


Tax Tree has an extremely high denial rate for loans but doesn’t share that information with its customers. In fact, ITS did just the opposite: franchisees encouraged customers to apply for loans that they might not be eligible for in order to charge them junk fees. The loan denial rate is bolstered by certain pre-denial criteria set by Ogbazion and his staff: for example, single males who file head-of-household and customers with expected refunds under $2,000 are categorically turned down – but not before paying related fees. Adding insult to injury, in a prior tax season, some taxpayers who met the criteria for loans were issued bad checks.


It wasn’t only the customers who were lied to: the complaint indicated that ITS had a written “IRS Audit Guide” to distribute to franchisees which encouraged lying to the IRS in the event of an audit. For example, the guide recommended telling Internal Revenue Service auditors that corporate policy prohibits filing tax returns based on paycheck stubs rather than forms W-2 (which is not allowed by the IRS per Publication 1345); in reality, the practice was common at ITS franchisees. The guide also encouraged franchisees to lie to the IRS about their tax preparation fees, claiming that tax preparation fees range from “FREE to $140″ (by now, you already know that fees at ITS average over $400).


The result of these behaviors was an “environment where fraudulent tax return preparation and violations of federal tax laws flourish.” A laundry list of illegal activities related to tax preparation was alleged including:


(1) preparing fabricated W-2s;
(2) preparing phony Forms Schedule C depicting fabricated businesses and income;
(3) falsely claiming education and dependent care credits to which their customers are not entitled;
(4) improperly claiming false filing status;
(5) reporting fictitious income and deliberately circumventing due diligence requirements in order to fraudulently maximize the Earned Income Tax Credit; and
(6) filing federal income tax returns without the taxpayer’s consent and fraudulently omitting certain sources of reportable income.


The feds argued that the powers that be at ITS “knew of and has reason to know of this pervasive illegal conduct, but did virtually nothing to stop it, and, at times, directly or indirectly encouraged it.” In at least one case, the government says that Ogbazion knew that a franchisee’s operation resulted in, from his own words:

[E]very tax return being done is pretty much fraudulent.

Ogdazion, however, did nothing to stop the fraud. In other situations, Ogbazion promoted employees suspected of fraud – once even awarding an accused fraudster with his own ITS franchise.


And how much did these behaviors cost taxpayers? The IRS randomly sampled 2010 tax returns prepared by five ITS franchisees and found that over half of the over 24,000 tax returns prepared by those franchises were non-compliant. The estimated tax loss to the government from those franchisees alone exceeded $16 million in 2011. Yes, from five franchisees. ITS boasts “hundreds of locations to choose from in 30 states” – the government believes that the losses at those locations would be just as significant.


At trial over the summer, evidence seemed to bolster the government’s claims. In a flurry of post-trial filings, ITS argued that the evidence presented focused on isolated incidents and were not representative of the company as a whole. The company further argued that it was making efforts to resolve these outstanding issues, a charge that the government disputes.


The judge was not convinced by ITS’ protestations, entering a permanent injunction ordering ITS Financial LLC, the parent company of the Instant Tax Service franchise, to close all operations. The injunction also bars Ogbazion “from operating or being involved with any business relating to tax-return preparation.” Tax Tree LLC and TCA Financial LLC were also ordered to cease operating.


And the judge didn’t mince words, writing that the harm to the public was “extensive and egregious, indeed appalling.”
The court further stated: “Defendants’ repeated attempts at trial and in argument to downplay the gravity of their lawlessness was stunning.”

That attitude was, the court found, the reason for “putting the Defendants permanently out of business.”
Ouch.


In its heyday in 2009, Instant Tax Service was ranked #1 on Entrepreneur Magazine’s Top New Franchises list; #1 lowest cost franchise in the United States and #3 as the fastest-growing franchise. Those honors remain predominantly displayed on the company’s home page – right next to a copy of the preliminary injunction against the company from October 2012 (downloads as a pdf).

These are the people behind the "Unfairtax" claim, people involved for many years opposing FairTax because it brings an end to the income tax and their gravy train, people you wouldn't want to cross the street with, yet they are the people with whom Americans share their most complete and private personal and financial information in order to comply with an income tax mandate.

Why would any American want to do that instead of just pay sales tax at the counter when you voluntarily purchase a new good or service and receive a rebate if you want one for the cost of FairTax on essentials up to the poverty line? Americans supporting an income tax is like politicians who support illegal immigration, all you can do is stand back stupefied and ask "Why?"