The U.S. Department of Education recently announced the end of their partnership with the Consumer Financial Protection Bureau.
As if the student loan crisis wasn’t bad enough already.
Created in 2011, the CFPB has worked alongside the Department of Education to protect student loan borrowers from systemic problems that student loan companies are causing. The Department of Education has now ended their information-sharing agreement to oversee private entities involved in federal aid programs.
The Department of Education claims this will help simplify the federal student loan process and that the CFPB had overstepped their agreement.
However, this move seems to benefit for-profit colleges more than the borrowers when you look closer.
The CFPB has been very active in pursuing and taking action on behalf of borrowers’ complaints. For example, in 2015, $480 million in student loans were forgiven for students who attended Corinthian College due to predatory and dishonest lending schemes.
With tuition and student debts steadily rising, there needs to be advocacy on behalf of the students. Evidently, the U.S. Department of Education doesn’t see it that way.
For someone who’s dealing with his fair share of student loans, this is an alarming development.
Here’s what student borrowers are now facing:
Increased Burden on the Department of Education
Student loan servicers are very much the lifeblood of the student loan industry, as they’re tasked with:
- Collecting and keeping track of payments
- Helping borrowers select and switch repayments plans
- Customizing loan payments
- Processing deferment/forbearance requests
- Helping students certify for loan forgiveness
And guess what? They’re far from perfect.
Since 2011, the Department of Education has shared valuable information with the CFPB to help sort out these issues.
That is no longer the case.
We’re talking about the same Department of Education which is run by Betsy Devos, who is advised by former for-profit college executives, and has put the CEO of a private student loan company in charge of federal student aid.
Is the Department of Education truly looking out for students?
More Delays for the Borrower Defense Rule
Unfortunately, it’s obvious that the Department of Education, under Betsy Devos, is more worried about protecting the interests of for-profit schools.
Let’s look at a key example.
In November of 2016, the Obama Administration passed the Borrower Defense Rule. This was meant to help students get their loans forgiven if they attended a fraudulent college.
The Borrower Defense Rule was supposed to be enacted in July, and 18 states (plus Washington D.C.) have sued the Department of Education based on their decision to delay and renegotiate this important program.
Why is this a big deal?
For starters, there are 65,000 pending claims of student loan fraud which need attention; these students’ loans have built up $143 million of interest while their applications stay in limbo!
The rule would also allow the Department of Education to seek money directly from the schools found guilty of fraud, which has major implications for the American taxpayer.
Did you know that federal student loans and grants provide the for-profit schools with the majority of their revenue?
According to the suit, “in 2009, the 15 publicly traded for-profit education companies received 86 percent of their revenues from taxpayer-funded loans”.
Will this program be reinstated by the Department of Education? What will it look like? How many more students will suffer under crushing and potentially fraudulent student loans?
Trouble for the Public Service Loan Forgiveness Program
Created in 2007, this program has provided loan relief to borrowers who work for a qualified public service employer, make 120 on-time payments, and have eligible loans and repayment plans (such as income-based).
The Department of Education will begin accepting applications for relief in October of 2017.
Over 500,000 people plan to receive debt relief under this program, and 85% of these people make less than $75,000 per year. These people fulfill important roles in our communities like teachers, nurses and social workers.
Wouldn’t it be nice if the program fulfilled its end of the bargain?
The Consumer Financial Protection Bureau created a report to analyze borrowers’ complaints between March 1, 2016 and February 28, 2017.
The common complaints included:
- Incorrect/insufficient information about loan forgiveness eligibility
- Processing delays/errors that cause missed payments
- Job certification issues that cause wrongful loan forgiveness denials
The CFPB has drawn warranted attention to these industry practices that obstruct loan forgiveness.
Meanwhile, borrowers are dealing with significantly higher debts due to the forfeiture of qualifying service time.
These people are making the sacrifices necessary to put themselves and society in better position. As a country, the least we could do is honor their hard work with fairness.
What do you think about the Department of Education’s decision? Let me know in the comments below.
All opinions expressed on this blog are solely those of Home at 30 and are in no way affiliated with any other organization or institution. The purpose of this blog is to give general education and information about investing, wealth, careers, and college; It is not intended to be professional advice.
After earning an undergraduate degree in Economics and a Master of Arts in Management at Wake Forest University, Josh has paid off over $90k in student loan debt in 3.5 years. By founding Home at 30, Josh wants to help you make the most of college, build a successful career, and achieve financial independence.