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.
It seems to be a new staple of the Trump administration in general to remove policies meant to help the middle class without better plans to replace them. As someone who worked two jobs while studying, it was still a nightmare navigating my debt post-graduation, with accidental interest fees accumulating and desperately trying to meet deadlines set with little notice from lenders. I was lucky enough to have some scholarships to ease the burden, but I know my experience was and still is very common. Obama’s mandate of streamlining the process and encouraging the Federal Student Aid office to help borrowers manage their debt sounded like a godsend. Even the simple action of having one company manage the many vendors would make things easier, but that search has now been called off.
One of the most concerning aspects of this move is eloquently explained by the New York Times:
“Critics of Ms. DeVos’ move this week are especially concerned about a particular piece of guidance from the Obama administration she struck down: that the Education Department should place great weight on a company’s track record when selecting student loan vendors, and should steer away from companies with histories of shoddy service or other problems.”
Devos’ actions mean companies like the previously mentioned Navient can still manage student loans, despite the recent lawsuits of being a predatory operation. DeVos and her department could theoretically hand over a giant contract to Navient, who has been accused of “mishandling loan payments, buried critical information in fine print and set obstacles for borrowers trying to release co-signers from their loans, among other failings, according to the consumer bureau’s legal filing.” Considering how much of a corporate and privatizing cheerleader DeVos has proven herself to be, this is a real possibility.
DeVos still insists she’s doing away with the Obama administration measures to improve the process.
“Our mission in the student loan servicing procurement process is to provide high quality customer service to federal loan borrowers in a cost-efficient and effective manner. I write today to reiterate the importance of the task ahead and reaffirm the Department’s commitment to achieving its mission. Unfortunately, this process has been subjected to a myriad of moving deadlines, changing requirements and a lack of consistent objectives. We now find ourselves in a situation where we must promptly address not only these shortcomings but also any other issues that may impede our ability to ensure borrowers do not experience deficiencies in service.”
The only part of that pure public relations spin that appears to be true is the “cost efficient” description. Everything else is just bullshit. You can’t just claim Obama’s plan didn’t have consistent objectives; does she think none of us read them? Because they’re very clear, namely “simplifying the repayment process, better protecting borrowers, and facilitating our oversight of servicing contractors.”
I think it’s a worthwhile investment for the Education Department to help a huge population of young graduates better manage huge loans. According to the Government Accountability Office, 70% of borrowers who defaulted on loans actually qualified for a lower monthly payment, but “services failed to provide sufficient information.” Additionally, when student loan services did contact “delinquent borrowers, the repayment information was often inconsistent.” Considering that loans affect individuals for a long period of time- not just loan repayment but credit history as well- I certainly don’t mind my tax money going to support youth trying to conquer these financial hurdles.
Obama’s plan was built to make repaying loans easier. DeVos, with zero education and experience in the field, has decided to step in and make navigating finances for higher education more difficult. Unless she’s planning on a surprise announcement of limitations on tuition fees, it makes me doubt her commitment and claims to help students. She appears to be putting the wants of loan providers ahead of the needs of students and borrowers. American Federation of Teachers president, Randi Weingarten, described these actions perfectly:
“She is enabling and empowering bad actors. It’s just another clear example of Betsy DeVos and the Trump administration putting the interests of predatory profiteers over the needs of the little guy--in this instance, the millions of people trying to go to college or acquire career skills without being crippled by debt.”
With headlines about tensions between North Korea, defunding Planned Parenthood, bombs being dropped, etc. it’s understandable that this may not be the red hot topic of choice in the news cycle. But isn’t it in the best interest to have an educated public? Then again, maybe not for Devos and her crew. If the youth of America become educated and aren’t bogged down in debt, they might just start paying attention to the other ridiculous policies the Trump administration is involved in. The maze of student debt has been made irreparably worse thanks to DeVos, but perhaps it’s just a matter of job security.