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Summertime often means a more relaxing pace but here in higher education financing, things are heating up for the summer of 2017.
Pause Button Hit on Borrower Defense to Repayment
First, there’s the news out of the US Education Department that a new round of negotiated rulemaking for borrower defense to repayment and gainful employment regulations will kick off in July. Disappointingly, it seems ED’s intention is to suspend the defense to repayment rule that was supposed to go live on July 1 (although a group of Democratic senators and state attorneys general are arguing that it’s illegal for ED to postpone the rules).
While the DTR rule that’s already on the books will still be available to borrowers, we think it’s a shame the version that was hashed out at the last negotiated rulemaking — rules intended to protect student borrowers from fraud and abuse — won’t be in effect in the interim. This is a time to do right by defrauded students who are consistently being misled into over-borrowing for underperforming programs of higher education. It is the duty of ED to insist on consumer protections for these borrowers, and if they believe improvements are needed to existing regulations, they should continue to protect borrowers from these predatory practices while another lengthy negotiated rulemaking plays out to improve the regulations. Students shouldn’t have the pause button hit on their consumer protections, and this isn’t the time for the Department of Education to step back from their responsibility to protect federal loan borrowers.
One Student Loan Servicer
More troubling news out of the Education Department: It was recently announced that servicing of the nation’s federal student loan portfolio will move to one single servicer. Under the Obama administration, ED had been moving to one servicing platform with several servicers working behind the scenes. One servicing platform, for consistent communication and lessened confusion for borrowers, makes sense. But just one servicer to handle it all doesn’t.
There’s no question that the federal student loan servicing system can be improved, as evidenced by the stubbornly high levels of delinquency and default despite the program’s multiple flexible repayment options. However, while a one-servicer approach may streamline processes, we are very concerned that this model will create a monopoly with no competitive incentives to innovate or provide high-quality service. Any revamp of the student loan servicing system must include comprehensive counseling and support for borrowers. We must not sacrifice quality for efficiency.
Sounding the PSLF Alarm
The Consumer Finance Protection Bureau recently released a report detailing the barriers some borrowers are reporting as they attempt to certify their eligibility for Public Service Loan Forgiveness. This fall marks PSLF’s 10th anniversary and as borrowers have to make 10 years of payment before they can have the remaining balance forgiven, the first wave of forgiveness begins this October. But according to the CFPB report, there are a lot of kinks in the PSLF process that could delay the granting of forgiveness for thousands of borrowers. Additionally, according to US Education Department data, although 500,000 borrowers have expressed interest in applying for PSLF at some point, less than 200 are on track to be eligible for forgiveness this fall, based on their employment certification and qualifying payments. That’s why earlier this year we launched our own PSLF awareness campaign, “10 Years to Zero Debt,” including online information, an employer toolkit, general webinars as well as webinars geared toward specific public service professions, links to the PSLF Employment Certification Form and more. It’s imperative that any administrative barriers to PSLF or misconceptions are cleared up now, so that thousands of borrowers expecting loan forgiveness aren’t in for a rude awakening come this October.
We’ll be keeping a close eye on all of these developments over the summer. Stay tuned!