logo
    • Magazine
    • Membership
    • Donate
  • Racial Justice
  • Economic Justice
    • Collections
  • Climate Justice
  • Health Justice
  • Leadership
  • CONTENT TYPES
  • Subscribe
  • Webinars
    • Upcoming Webinars
    • Complimentary Webinars
    • Premium On-Demand Webinars
  • Membership
  • Submissions

College Students, Beware: DeVos Rules on Student Loans

Martin Levine
April 19, 2017
Share
Tweet
Share
Email
Print
By ArtofCulturalEvolution (Own work) [CC BY-SA 3.0], via Wikimedia Commons

April 11, 2017; Bloomberg

Student debt is a personal challenge for more than 44 million Americans, but a lucrative business opportunity to the firms that manage the more than $1 trillion now outstanding. With a delinquency rate currently exceeding 11 percent, some see student loans as a major risk to the U.S. economy, one rivaling the mortgage loan market that crashed in 2007. There has also been widespread concern about the effects of college debt on the lives of individual students “what authorities describe as systematic mistreatment of borrowers.” Because these loans are guaranteed or are made directly by the federal government, the U.S. Department of Education is responsible for managing this complex system and balancing the competing interests of the various stakeholders.

Last week, Education Secretary Elizabeth DeVos took action to reverse the course she inherited from the prior administration. In 2015, President Obama announced his Student Aid Bill of Rights, which aimed both to create a more efficient loan management system and to “reduce student loan defaults and encourage borrower success.” In recognizing the needs of borrowers, it sought to more fairly balance the interests of individual borrowers with those of the federal government and those doing business managing the debt under government contract. Two policy directives from the Obama administration’s Department of Education, which Bloomberg News described as directing the Federal Student Aid office to “do more to help borrowers manage, or even discharge, their debt,” were cancelled.

The Obama administration sought to balance the interests of those taking out student loans and the business interests of the private firms contracted to service and collect these debts. Ideally, by taking borrowers’ interests into account, the amount of unpaid debt would be decreased, as would the cost to the federal government, and the harmful effect of predatory practices could be lessened. In her memo to the FSA, Secretary DeVos showed that efficient repayment was the singular goal of her new department: “We have a duty to do right by both borrowers and taxpayers…to acquire new federal student loan capabilities that will provide borrowers with the tools necessary to efficiently repay their debt.” She described the prior guidance she was cancelling as confusing and inconsistent but did not cite any specific actions that illustrated her concerns.

Student loan expert Heather Jarvis saw the Education Department’s new direction as clearly choosing the interests of business over those of students. She told NBC News, “Borrowers don’t get to decide who their servicers are and [the servicers] can make your life miserable if they’re not doing a good job, and they’re not. For years, the government was content to award contracts based on the collection success of servicers. But Obama became aware of the problems students and families face and decided we want you to do better.” The federal government spends $800 million annually to collect student loan debt.

Sign up for our free newsletters

Subscribe to NPQ's newsletters to have our top stories delivered directly to your inbox.

By signing up, you agree to our privacy policy and terms of use, and to receive messages from NPQ and our partners.

Former Deputy Treasury Secretary Sarah Bloom Raskin, who had worked on these issue from the perspective of managing U.S. debt, interpreted the secretary’s actions as “the Trump administration…placing the welfare of loan contractors above those of student debtors.” She confessed to Bloomberg her worries over the harm that could come from by cancelling the plan “with no coherent explanation or substitute.”

Secretary DeVos’ latest act was preceded by another by the Trump administration that favored banks and loan servicers. In March, the Department of Education reversed another Obama-era policy that disallowed the charging of some fees on those who had fallen behind in student loan repayments. According to Politico, this “2015 guidance had prohibited guaranty agencies that collect federally-backed loans from imposing collection fees when borrowers default on their debt but quickly agree to start repaying. The guidance affected hundreds of millions of dollars in fees for tens of thousands of student loan borrowers.”

The Obama administration also acted to hold companies contracted by the federal government to service student debt more accountable for their actions and had targeted four specific firms based on their predatory practices. According to Politico, “The Obama administration said it wanted to cut ties with the companies because it determined they made ‘materially inaccurate representations’ to borrowers trying to get their loans out of default.” The four firms went to court to challenge the federal action and demand they be reinstated. Recently, “an Education Department official wrote in court documents that the agency has decided to ‘reconsider’ the Obama administration’s February 2015 decision.” The official also told the court that prior findings of improper behavior by these firms would not be taken into account as part of this new review.

In the Trump era, it’s better to be a lender or loan servicer than a borrower. For students looking to finance their college educations, caveat emptor is the best advice they can expect.—Martin Levine

Share
Tweet
Share
Email
Print
About the author
Martin Levine

Martin Levine is a Principal at Levine Partners LLP, a consulting group focusing on organizational change and improvement, realigning service systems to allow them to be more responsive and effective. Before that, he served as the CEO of JCC Chicago, where he was responsible for the development of new facilities in response to the changing demography of the Metropolitan Jewish Community. In addition to his JCC responsibilities, Mr. Levine served as a consultant on organizational change and improvement to school districts and community organizations. Mr. Levine has published several articles on change and has presented at numerous conferences on this subject. A native of New York City, Mr. Levine is a graduate of City College of New York (BS in Biology) and Columbia University (MSW). He has trained with the Future Search and the Deming Institute.

More about: Nonprofit NewsPolicystudent debtTrump administration

Become a member

Support independent journalism and knowledge creation for civil society. Become a member of Nonprofit Quarterly.

Members receive unlimited access to our archived and upcoming digital content. NPQ is the leading journal in the nonprofit sector written by social change experts. Gain access to our exclusive library of online courses led by thought leaders and educators providing contextualized information to help nonprofit practitioners make sense of changing conditions and improve infra-structure in their organizations.

Join Today
logo logo logo logo logo
See comments

Spring-2023-sidebar-subscribe
You might also like
Cancelling Student Debt Is Necessary for Racial Justice
Kitana Ananda
To Save Legal Aid, Expand Public Service Loan Forgiveness
Zoë Polk
No Justice, No Peace of Mind and Body: The Health Impacts of Housing Insecurity for Black Women
Jhumpa Bhattacharya, Maile Chand and Andrea Flynn
The Human Impact of the Global Refugee Crisis Must Be Understood—And Acted Upon
Anmol Irfan
Black Americans Need Reparations: The Fight for the CTC Highlights the Roadblocks
Jhumpa Bhattacharya and Trevor Smith
Edgar Cahn’s Second Act: Time Banking and the Return of Mutual Aid
Steve Dubb

NPQ Webinars

Group Created with Sketch.
June 14th, 2:00pm ET

Remaking the Economy

Race for Profit

Register Now
June 22nd, 12:30 pm ET

Making Co-CEOs Work

Insights from Leaders Sharing Leadership Successfully

Register Now
Group Created with Sketch.
July 12th, 2:00 pm ET

Remaking the Economy

Tenant Organizing in Unexpected Places

Register Now
You might also like
Cancelling Student Debt Is Necessary for Racial Justice
Kitana Ananda
To Save Legal Aid, Expand Public Service Loan Forgiveness
Zoë Polk
No Justice, No Peace of Mind and Body: The Health Impacts of...
Jhumpa Bhattacharya, Maile Chand and Andrea Flynn

Like what you see?

Subscribe to the NPQ newsletter to have our top stories delivered directly to your inbox.

See our newsletters

By signing up, you agree to our privacy policy and terms of use, and to receive messages from NPQ and our partners.

NPQ-Spring-2023-cover

Independent & in your mailbox.

Subscribe today and get a full year of NPQ for just $59.

subscribe
  • About
  • Contact
  • Advertise
  • Copyright
  • Careers

We are using cookies to give you the best experience on our website.

 

Non Profit News | Nonprofit Quarterly
Powered by  GDPR Cookie Compliance
Privacy Overview

This website uses cookies so that we can provide you with the best user experience possible. Cookie information is stored in your browser and performs functions such as recognising you when you return to our website and helping our team to understand which sections of the website you find most interesting and useful.

Strictly Necessary Cookies

Strictly Necessary Cookie should be enabled at all times so that we can save your preferences for cookie settings.

If you disable this cookie, we will not be able to save your preferences. This means that every time you visit this website you will need to enable or disable cookies again.