Trump administration rolls back protections for people in default on student loans

[Independent voter]

On the one hand it's nice to see students getting the money they need to get through college, on the other hand if the students don't pay the loan back, we tax payers will have to.




https://www.washingtonpost.com/news/...student-loans/

Days after a report on federal student loans revealed a double-digit rise in defaults, President Trump’s administration revoked federal guidance Thursday that barred student debt collectors from charging high fees on past-due loans.

[Student loan defaults are rising faster than you think]

The Education Department is ordering guarantee agencies that collect on defaulted debt to disregard a memo former President Barack Obama’s administration issued on the old bank-based federal lending program, known as the Federal Family Education Loan (FFEL) Program. That memo forbid the agencies from charging fees for up to 16 percent of the principal and accrued interest owed on the loans, if the borrower entered the government’s loan rehabilitation program within 60 days of default.

The Obama administration issued the memo after a circuit court of appeals asked for guidance in a case against United Student Aid Funds (USA Funds) challenging the assessment of collection costs. Bryana Bible took the company to court after being charged $4,547 in collection costs on a loan she defaulted on in 2012. Though she had signed a “rehabilitation agreement” with USA Funds to set a reduced payment schedule to resolve her debt, the company assessed the fees.

Education officials sided with Bible, prompting USA Funds to sue the department in 2015. Earlier this year, the company agreed to pay $23 million to settle a class-action lawsuit born out of the Bible case, though it did not admit any wrongdoing.

The two-page “Dear colleague” letter from the Trump administration walks back the department’s previous stance on the grounds that there should have been public input on the issue.

“The department will not require compliance with the interpretations set forth” in the previous memo “without providing prior notice and an opportunity for public comment on the issues,” the letter said.

The action does not affect any borrowers whose loans are held by the Education Department, according to the department. It could, however, impact nearly 7 million people with $162 billion in FFEL loans held by guarantee agencies.

Nearly half of the total outstanding student debt in default comes from the FFEL program. There has been a fairly steady increase in the total amount of past-due debt in the program, even as the number of borrowers has declined, suggesting that interest charges and other fees are being tacked on to balances.

On Monday, Sen. Elizabeth Warren (D-Mass.) and Rep. Suzanne Bonamici (D-Ore.) sent a letter urging the Education Department to uphold the Obama administration’s guidance on the collection fees, which they said “results in an unnecessary financial burden on vulnerable borrowers.”

“Congress gave borrowers in default on their federal student loans the one-time opportunity to rehabilitate their loans out of default and re-enter repayment,” the letter said. “It is inconsistent with the goal of rehabilitation to return borrowers to repayment with such large fees added.”

[melodramocracy]

On the one hand it's nice to see students getting the money they need to get through college, on the other hand if the students don't pay the loan back, we tax payers will have to.

Few if any chirp when colleges indirectly use taxpayer dollars to build or rebuild football stadiums, for example. Boosting fees on a loan that the student already can't pay just seems short-sighted, so it's no surprise this administration came up with the idea.


Here's how to actually solve the issue: Student loans are null and void until the graduate is working in a field related to his / her degree, with a salary commensurate to the caliber of the degree.

/yes, I know that will never happen.

[McFuu]

Few if any chirp when colleges indirectly use taxpayer dollars to build or rebuild football stadiums, for example. Boosting fees on a loan that the student already can't pay just seems short-sighted, so it's no surprise this administration came up with the idea.


Here's how to actually solve the issue: Student loans are null and void until the graduate is working in a field related to his / her degree, with a salary commensurate to the caliber of the degree.

/yes, I know that will never happen.

It will never happen because it doesn't really make sense. It's a bit like saying you don't have to pay back the loan on your house, until after you sell it.

Unfortunately student loans are unsecured loans, no real collateral, nothing to repossess. The value is entirely tangible on the person taking the loan, even if they graduate top of their class, they still may not be proper hiring material. Or simply they may not even like their field of study.

Lending institutions should be taking steps to protect themselves from borrowers who may not be able to ever repay. The government should be protecting students from institutions who over charge for education that they can get at local schools or community college. The whole system is fucked up.

I honestly really don't know how to take the repealing of this memo, or the fact the memo existed in the first place...

[xChurch]

I don't understand, people can't afford their payments and default, so they're going to try to charge even more money as a result? What is it with conservatives and trying to punish people who already have money woes? They're trying to do it with their "healthcare" plan as well, not to mention the complaints about poor people not paying taxes.

[Spectral]

I'd like to see universities that have multi-billion dollar endowments chip in to mitigate this sort of problem rather than shunting it off on taxpayers.

I can't say that I have a lot of sympathy for people that take student loans that they're not going to pay back though.

[McFuu]

I don't understand, people can't afford their payments and default, so they're going to try to charge even more money as a result? What is it with conservatives and trying to punish people who already have money woes? They're trying to do it with their "healthcare" plan as well, not to mention the complaints about poor people not paying taxes.

It's an issue on both sides of the aisle. Republicans will enact penalties on loaned amounts, while Democrats are huge proponents of sub-prime loans in general. Both sides are assholes.

[melodramocracy]

It will never happen because it doesn't really make sense. It's a bit like saying you don't have to pay back the loan on your house, until after you sell it.

Unfortunately student loans are unsecured loans, no real collateral, nothing to repossess. The value is entirely tangible on the person taking the loan, even if they graduate top of their class, they still may not be proper hiring material. Or simply they may not even like their field of study.

Lending institutions should be taking steps to protect themselves from borrowers who may not be able to ever repay. The government should be protecting students from institutions who over charge for education that they can get at local schools or community college. The whole system is fucked up.

I honestly really don't know how to take the repealing of this memo, or the fact the memo existed in the first place...

Well, a house provides immediate value in the form of shelter. A degree doesn't necessarily.

The idea would be that colleges become more involved in the job acquirement process, lower costs, and possibly refocus curriculum based on what industries are out there right now.

I'm all for other ways to enable such a change in that particular environment. As it is, AFAIK, student loans are already something that cannot be absolved via bankruptcy (and shouldn't be, as that particular system would then get abused).

[xChurch]

It's an issue on both sides of the aisle. Republicans will enact penalties on loaned amounts, while Democrats are huge proponents of sub-prime loans in general. Both sides are assholes.

Sadly that's true on far to many issues.

[Xeones]

Trump just wants to prove he is an enemy to the American people every day.

And to think after he was elected there was a short period of time I tried to delude myself into thinking "It couldn't be that bad right?"

[Spectral]

I don't understand, people can't afford their payments and default, so they're going to try to charge even more money as a result? What is it with conservatives and trying to punish people who already have money woes? They're trying to do it with their "healthcare" plan as well, not to mention the complaints about poor people not paying taxes.

While I basically agree with the core here, I have to ask, who do you think should cover the cost of defaulted students loans?

[xChurch]

While I basically agree with the core here, I have to ask, who do you think should cover the cost of defaulted students loans?

As unfortunate as it is, I don't see any other option than the government (taxpayers), since the people who defaulted in most cases probably can't afford to pay it back, and adding more cost is only going to make that even harder. The irony is, if the government just provided "free" post-secondary then it could probably reduce costs across the board..."probably" being the key word. As it is currently though, it's really a damned if you do, damned if you don't situation. I'm not sure if in the US you get any kind of grace period when it comes to student load programs though, like don't have to pay till you make X dollers or some such. If not, that could be another option.

[Wells]

Nice to see our populist president sticking up for the little guy against Big Borrower.

[the game]

The banks got a bailout. Automotive manufacturers got a bailout. It's time for college students to get a bailout.

[GreenJesus]

As unfortunate as it is, I don't see any other option than the government (taxpayers), since the people who defaulted in most cases probably can't afford to pay it back, and adding more cost is only going to make that even harder. The irony is, if the government just provided "free" post-secondary then it could probably reduce costs across the board..."probably" being the key word. As it is currently though, it's really a damned if you do, damned if you don't situation. I'm not sure if in the US you get any kind of grace period when it comes to student load programs though, like don't have to pay till you make X dollers or some such. If not, that could be another option.

So, should the government pay for Sally to learn about Feminism and underwater basket-weaving at University of Arizona and get drunk every other day, never show up to class and scrape by with a C- GPA? Then, after college she has no career path and works at Subway? Most taxpayers would rather not pay for it.

Additionally, interest rates are a ratio of risk. Student debt is probably one of the riskiest investments. Why give out student loans at a rate less than other investments when I can invest that capital in an asset with less risk for same rate? You are forcing loaners to be a charity.

[Wyrt]

So, should the government pay for Sally to learn about Feminism and underwater basket-weaving at University of Arizona and get drunk every other day, never show up to class and scrape by with a C- GPA? Then, after college she has no career path and works at Subway? Most taxpayers would rather not pay for it.

Additionally, interest rates are a ratio of risk. Student debt is probably one of the riskiest investments. Why give out student loans at a rate less than other investments when I can invest that capital in an asset with less risk for same rate? You are forcing loaners to be a charity.

Ah yes, the whole "Every student should suffer because a small handful of students are stupid" argument.

[Spectral]

As unfortunate as it is, I don't see any other option than the government (taxpayers), since the people who defaulted in most cases probably can't afford to pay it back, and adding more cost is only going to make that even harder. The irony is, if the government just provided "free" post-secondary then it could probably reduce costs across the board..."probably" being the key word. As it is currently though, it's really a damned if you do, damned if you don't situation. I'm not sure if in the US you get any kind of grace period when it comes to student load programs though, like don't have to pay till you make X dollers or some such. If not, that could be another option.

How about the colleges themselves eating the costs, or at least some portion thereof? To me, taking in students who wind up not being able to pay back the huge amount of money that they paid for the services of the university is a real black mark on the university. Maybe it's time for schools to stop collecting billions of dollars for students that don't seem to have gotten their money's worth.

[Kaeth]

As it is, AFAIK, student loans are already something that cannot be absolved via bankruptcy (and shouldn't be, as that particular system would then get abused).

When the bill passed which made student loans from private lenders ineligible for discharge through bankruptcy, there was no evidence at the time that bankruptcy was being abused by college students to avoid paying back their loans. It was all an imaginary narrative made up by lending industry lobbyists to justify preferential treatment.

Strangely enough, it seems like a lot of honest people prefer paying back their debts (when able to do so) to having no credit for the next ten years.

[Wells]

When the bill passed which made student loans from private lenders ineligible for discharge through bankruptcy, there was no evidence at the time that bankruptcy was being abused by college students to avoid paying back their loans. It was all an imaginary narrative made up by lending industry lobbyists to justify preferential treatment.

Strangely enough, it seems like a lot of honest people prefer paying back their debts (when able to do so) to having no credit for the next ten years.

This this isn't more of a scandal today is amazing.

[Spectral]

So, should the government pay for Sally <snip>

I agree with your basic point, but also when to point out that when we say, "the government" what we really mean is, "should we take money from income earners".

[Machismo]

Personally, I don't think the government should even be involved in student loans. if someone takes out a loan, and doesn't pay it back, the collateral should go to the loan agency. I have no problem allowing this.