Trump to Overhaul Servicing of Student Loans

Strap in, it’s going to be a bumpy ride. The new head of the Department of Education, Betsy DeVos, has not been without its controversies. The latest is the resignation of James Runcie, head of the student aid office, in response to pressure to testify before Congress and micromanagement by political appointees. Additionally, further crackdowns against for-profit schools appeared to be idled for the duration, which means that the Obama era regulations that govern for-profit school practices may be done away with altogether. Secretary DeVos has also brought in former executives from the for-profit educational sector who are ready to roll back the Obama administration’s enforcement record and regulations.

These executives claim that the misdeeds of a tiny percentage of schools have tarred the entire for-profit industry with the same brush. They defend for-profit schools as offering a ladder to the middle class for the most disadvantaged students even as a consortium of for-profit schools have entered a California court to demand a rollback of the borrower defense to repayment rule. Part of the new lawsuit even seeks to block the requirement that for-profit colleges disclose when their students have low rates of repayment for their student loans.

Loans are also on the chopping block, with key student loan programs facing the axe. This overhaul will see a complete renovation of the student loan servicing program. The main proposals are focused on cutting the number of loan repayment options available to student borrowers’ eliminating the public service loan forgiveness program introduced by the Bush administration. Additionally $3.9 billion would be removed from the Pell grants program which is reserved for students in financial need, and the maximum award would be capped at $5920. Of highest concern is condensing all of the income driven repayment plans into a single plant that would forgive whatever balance remains after 15 years of payments of 12.5 percent of the borrower’s discretionary income.

While all of these are valid concerns, for present and future students it’s the news surrounding student loan repayment that has a number of people up at night. Under a new plan released on May 21, and initial read assures superior customer service, touts borrower protections, increases oversight, and enhances taxpayer protection through cost savings. The current secretary blames the Obama administration for creating a chaotic system, lacking “common sense” and overwhelmed with consumer complaints. However, borrower advocates are deeply concerned that under the new system borrowers will face more risk and have less in the way of consumer protections, recourse against fraudulent schools, or abusive collection practices. Also of concern is the reliance on a single student loan servicing company to handle all student loan servicing – effectively creating a federal student loan monopoly.

Wherever you are with your student loans, we are here to help you get them in hand. Whether it is consolidation, negotiation, or pursuing borrower defense to repayment, we have experienced in getting people out from under. The cost of an education, should not be lifelong debt. Call our offices in Fort Lauderdale or West Palm Beach, we are open seven days a week, and your consultation is free.