Betsy DeVos reverses Obama-age directives aimed at protecting student loan borrowers

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• Publié par: utterbacklaurence62
• Publié le: 19 avril 2017
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Betsy DeVos reverses Obama age

A directive merely issued by Betsy DeVos is raising alarm among student loan borrower supporters.

In a memo sent Tuesday to James Runcie, the chief operating officer of Federal Student Aid (FSA), DeVos rescinded Obama-age directives aimed at holding student loan servicers — the companies hired by the government to manage the repayment process — liable for working in borrowers’ best interests.

In the memo, DeVos took guidance sent to Runcie, instructing him to look at a servicer’s past performance when deciding whether to award the business a contract that was new. DeVos’s memo also takes a directive sent by former undersecretary of instruction Ted Mitchell instructing Runcie to hold servicers answerable for satisfying basic customer care standards, like reacting immediately to borrowers, and reward those companies that do the greatest at ensuring borrowers are on track toward repaying their loans.

“Is this meant to be a message that says we are less concerned with borrowers and much more concerned with shielding servicers even when they made mistakes before?”

The memo comes as borrower advocates and higher education leaders are watching carefully to see how student loan borrowers are treated by the Trump management. They expressed concern after the Department of Education reversed an Obama-age directive from charging high fees to defaulted borrowers who make an effort rapidly to become current on their debts, preventing student loan debt collectors.

The precise implications of DeVos’s new guidelines remain uncertain. The Section didn’t immediately respond to your request for comment. The agency is in the middle of giving a money-making servicing contract that is new to one thing. Two public companies, Navient and Nelnet, are finalists for the award that is new. But it’s hard to say whether that contract process will continue, given DeVos’s memo that is new, or if the Section will start again with an entirely new contract process. No matter how the process evolves from here, investors and borrower advocates will be watching closely to see which firms are rewarded with contracts.

The marketplace is likely to be looking carefully at whether they'll begin the method from scratch, ” said the former student loan ombudsman, a senior fellow in the Consumer Federation of America and Rohit Chopra in the Consumer Financial Protection Bureau. Now there are large companies with a large amount of revenue on the line and they’ll be pressing difficult to keep taxpayers resources flowing into them.”

The Obama-era directives rescinded by DeVos came after years of borrower advocates expressing concern that

student loan servicers weren’t working in borrowers’ best interest, making it harder for their sake to repay their loans. The government offers a slew of repayment plans avoid default and federal student loan borrowers can use to repay their debt according to their income.

But reports from the Government Accountability Office, the Consumer Financial Protection Bureau as well as probes and litigations in the CFPB and state law enforcement officials indicate that a few servicers don’t do a good enough job of helping borrowers register in these programs and instead direct them toward repayment strategies that'll allow it to be more difficult for them to settle their debts.

The federal student loans were defaulted about by more than 1 million borrowers last year as well as in lots of cases those defaults — a credit destroying occasion — could happen to be avoided if borrowers were enrolled in any of these repayment programs.

Borrower supporters stress that DeVos’s memo can make it more easy for servicers who don’t work in borrowers’ best interests to keep on to do so but still win lucrative government contracts.

“ There’s lots of issues out there and these basic common sense protections are amazingly necessary,” said Persis Yu, the manager of the Student Loan Borrower Assistance Project at the National Consumer Law Center. “ It baffling to view them being rolled back at this point.”

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