to people wondering how they are ever going to handle
all their student loans: Be tough. Pay up. Donít
expect the federal government to play Mr. Nice Guy.
a surprising twist after a presidential election in
which young adults pleaded for relief from $1.3 trillion
in student loans, the Trump administration doesnít
look like itís going to coddle federal student loan
borrowers. In fact, itís rolling back Obama-era
reforms that would have made it easier on borrowers.
U.S. Department of Education under Obama had discovered
through numerous studies that people with student loans
were getting awful service ó even incorrect
information ó when they called student loan call
centers to find out what to do with their loans.
Reforms, which were outlined but not yet implemented,
were supposed to fix the problems.
the problems: Student loan call centers not answering
phone calls from borrowers at convenient times, not
telling borrowers how to make payments they could
afford, and not warning borrowers about extra fees.
Instead of providing customer service, the staff taking
borrower calls often simply shoved them through the
system, according to the studies. Borrowers reportedly
were pushed into skipping payments instead of being told
how to handle their obligations.
frustration, many borrowers have been giving up and
walking away from their student loans without paying
anything. Studies claim this is a significant driver of
defaults, and a burden for taxpayers. About $137.4
billion in federal loans are now in default.
with a new administration in charge of student loans,
the reforms aimed at curing those ills were aborted in a
memo this past week from Secretary of Education Betsy
DeVos. What she plans to do instead of the reforms isnít
clear. The department didnít respond to my request for
more information. But consumer advocates are worried
that she will allow old practices to continue and leave
student loan borrowers without the help needed to avoid
Attorney General Lisa Madiganís take on the change is:
"The Department of Education has decided it does
not need to protect student loan borrowers."
has been among those calling for reforms for years.
Besides consumer groups, the Government Accountability
Office and Consumer Financial Protection Bureau have
conducted detailed studies faulting the Department of
Education for not policing the private companies, known
as loan servicers, it hires to collect loan payments and
answer calls from student borrowers.
office is suing one of the largest companies with a
government contract, Navient Corp., descended from
suit claims that instead of serving 12 million borrowers
with $300 billion in student loans and helping them onto
the right track for paying their loans, Navient
incentivizes its employees to get rid of callers
complaint says: "Instead of taking more time to
discuss other options with borrowers, such as
income-driven repayment plans, Navient saved itself
money and cost borrowers millions of dollars in added
interest on their loans. Ö They repeatedly misled
borrowers about their options to bring their loans
the Obama-era reforms the suit would have been important
if Illinois won the case. The reforms required that the
Department of Education consider the track records of
servicers they hire. But with the DeVos memo to abandon
those reforms, consumer advocates are wondering if track
records will be considered.
time will tell if the government is on the side of
borrowers or servicing companies," said Rohit
Chopra, a fellow of the Consumer Federation of America.
He has been a critic of past practices. The system, he
said, has been "working well for the student loan
industry and failing borrowers, taxpayers and the
is not the only servicer that has been criticized in
student loan servicing studies, but it is among the
largest. The Consumer Federation of America said
government data suggest Navient has had a poor track
record on getting students into affordable payment
spokeswoman Patricia Nash Christel said that the company
has been effective in putting borrowers into affordable
plans. In response to the Illinois suit, Christel said
the company "will vigorously defend against these
false allegations and continue to help our customers
achieve financial success."
reforms now on hold and the future unclear, borrowers
may continue to face inattentive staff and even
inaccurate information if they are struggling with their
loans. Chopra said itís important for people with
student loans to understand that they can get their
monthly payments reduced if their incomes are too low to
handle full payments. Read about income based repayment
plans here: www.tinyurl.com/q8u77e2.
study by the GAO in 2015 said that half of people making
their student loan payments would have qualified to pay
less under government rules that take income into
account. But only 13 percent of the borrowers knew to
ask for the lower payments. Whether your servicer helps
you or not, use this form to apply for affordable
payments: www.tinyurl.com/m5e6hrk. Beware of private
firms offering to help you get loan payments reduced.
There are a lot of predators taking advantage of