In early March President Obama announced new steps that the Department of Education will take in order to help the millions of Americans that are repaying student loans. Many of the reforms are aimed at those who are struggling to pay under a standard 10-year repayment plan, or those who have already fallen behind in payments. The announcement was welcomed by consumer advocates, although all agreed that more significant changes to the current student loan crisis can only be achieved through congressional action.
A few of the changes include:
Centralized website and single complaint system. This will allow borrowers to get information about all of their loans and to easily file complaints.
Improved communication with borrowers. The Department of Education is tasked with devising better ways to communicate with student loan borrowers, especially those in the late stage of delinquency. (Learn more about student loan repayment programs.)
Pilot program for federal employees to collect defaulted loans. The hope is that these employees will understand the rights and repayment programs available to borrowers and will not engage in the deceptive and illegal tactics that advocates allege private student loan collectors regularly engage in.
Raise the bar for private student loan debt collectors. Require better disclosures and stronger protections when borrowers fall behind in payments, loans are transferred from one servicer to another, or when borrowers begin but do not finish applying for a repayment program or other relief.
Prepayments applied to loan with highest interest first. Feds will require student loan collectors to do this, and presumably enforce the new rule.
Reasonable fees. The feds will set forth reasonable fees that collectors can charge.
To learn more, see the White House’s Fact Sheet.