U.S. Ed. Sec Rolls Back Protections for Student Loan Borrowers
By Amanda Scott
U.S. Ed. Sec Rolls Back Protections for Student Loan Borrowers
U.S. Education Secretary Betsy DeVos issued an order this week, removing protections for people with federal student loans.
The previous memorandums, issued last year by the Obama administration, calls on the government’s Federal Student Aid office to review the performance of student loan servicers’, the private companies that have contracts to manage federal student loan repayments.
It directed the office to require loan servicers’ to assist severely delinquent borrowers by notifying them of their eligibility for loan repayment plans based on their current income. It also calls for loan companies to increase transparency with borrowers, provide better customer service and provide options to help people stay on track with repayments.
In a memo, released Tuesday, DeVos cited a “lack of consistent objectives” and cost of oversight as her reasons for ditching the previous administration's plan.
“Our mission in the student loan servicing procurement process is to provide high quality customer service to federal loan borrowers in a cost-efficient and effective manner,” DeVos said in the memo.
Analysts say the DeVos memo could increase the likelihood of borrowers defaulting on their loans. They also warn that the rollback sends the message to student loan servicers' that protecting borrowers is no longer a priority.
Analysts recommend that borrowers do more research for themselves and not rely on the student loan servicing companies to offer the best options.
In a 2015 report, the Consumer Finance Protection Bureau, a federal agency that deals with consumer protection, recommended the Department of Education set a framework to improve student loan servicing practices.
Suggestions included recommending consistent standards for the student loan servicing market, strengthening servicer communications, as well as, increased accountability and providing the public with access to information on student loan performance.
According to the Federal Reserve, more than 41 million Americans have student loan debt, totaling some $1.1 trillion. Borrowers have an average debt of around $27,000, as of late 2015.
