Betsy DeVos Eliminates Obama-Era Help for Student Loans
Education Secretary Betsy DeVos brought student loan protections to a screeching halt last week. She announced last Tuesday that the education department would be rescinding all efforts made by the Obama administration for guidelines and a centralized system of repayment. More troubling, she has since given the power and authority for student loans back to the loan vendors without any accountability needed.
In a statement released April 11, DeVos claimed that the move would “improve outcomes and experiences for federal student loan borrowers, as well as demonstrate sound fiscal stewardship of public dollars.” However, according to Fortune Magazine, the rollback of the protections followed a letter from industry lobbying National Council of Higher Education Resources asking Congress to alter or delay the Education Department’s changes.
This choice means that three memos issued by former President Obama’s education secretary John King will no longer be enforced. They called for holding companies accountable for borrowers receiving accurate, consistent and timely information about their debt, and “the creation of financial incentives for targeted outreach to people at great risk of defaulting on their loans, a baseline level of service for all borrowers and a contract flexible enough to penalize servicers for poor service among other things.”
During the Obama administration, the number of people defaulting on their student loans shocked and prompted action. The number was somewhere around 8.7 million people- that roughly translated to someone defaulting every 29 seconds. Obama decided to direct the Federal Student Aid Office to shift its focus, spend less time on debt collection, and help borrowers find ways to manage debt with repayment plans and other techniques. It all sounds rather logical, so Devos’ decision confuses many.
The Washington Post attempts to explain, but fails to mention the fact that the guidelines were enacted after the Government Accountability Office found that the Department of Education’s outsourced debt-collectors were cheating borrowers and engaging in other corrupt, negligent and criminal practices. The Post reported that the federal government was paying “hundreds of millions of dollars to companies such as Navient, Great Lakes, and American Education Services to manage $1.2 trillion in student loans.” Many experts, upon review, have concluded that the “loans were designed to fall” so that, while the students suffered, the lenders would profit immensely. It begs the question: why is DeVos scaling back efforts to correct a corrupted, broken finance system?
There are an estimated 43 million students across the US who have borrowed or are borrowing federal student loans, so it’s rather troubling that DeVos, who never took out a student loan in her life, decided to undercut the efforts being made to organize and help students. The Federal Reserve Bank of New York released a study at the beginning of April that found outstanding student loan debt is at $1.3 trillion. The average student is now graduating with $34,000 in debt. With a staggering 71% of US students graduating with loans, it seems irresponsible for DeVos to withdraw the Obama-era protections without any replacement plan.