Democrats worried about how the new Education Secretary Betsy DeVos would be with student debt given that she had invested in a company that collect defaulted loans. They were right to be worried:
The U.S. Education Department late Thursday rescinded an Obama-era rule that prohibited student loan guaranty agencies from collecting jumbo fees from defaulted borrowers who quickly resume paying.
Currently, guaranty agencies — the bodies that administer federal loans made before 2010 — aren’t allowed to collect fees from borrowers who respond within 60 days to a default notice and then enter into (and honor) a repayment agreement. Those rules were put in place in July 2015.
The Obama-era rule on collection fees was linked to a court case that started in 2013, in which a borrower sued United Student Aid Funds (USA Funds) for hitting her with a $4,500 charge from a 16% collection fee. She owed $18,000 at the time her loans went into default, but she responded to USA Funds and agreed to a repayment plans.
The two-page “Dear colleague” letter from the Trump administration walks back the department’s previous stance on the grounds that there should have been public input on the issue.
“The department will not require compliance with the interpretations set forth” in the previous memo “without providing prior notice and an opportunity for public comment on the issues,” the letter said.
I have a feeling they’re not going to be asking for any public input in the near future. This doesn’t affect loans that have been taken out recently:
The rule only applies to debt from the Federal Family Education Loan (often called FFEL loans) Program, which was phased out during Obama’s first term. The department started lending directly to student borrowers in 2010, so the rule won’t affect anyone who’s taken out loans in the past several years.
but I have a feeling that these loans directly from the Education department aren’t going to be around for much longer.
It also appears that the President might be thinking about reopening Trump University:
Less than a month after Betsy DeVos was sworn in as its top official, the U.S. Department of Education announced Monday evening that it would delay until July 1 an effort to crack down on career training programs that load students up with unpayable debt.
The biggest winners: the more than 800 higher educational programs that claim to lead to “gainful employment” but flunked the department’s January excessive debt test—mostly for-profit art and cosmetology schools. These programs can now continue to recruit applicants (at least until July 1) without having to warn them about alumni’s oppressively high debt loads. The schools can also take this extra time to seek data showing that their graduates’ student loan bills are actually below the official “excessive debt” cutoff. That means bills must be no more than 12% of the average student’s gross earnings, as reported to the Social Security Administration, and no more than 30% of their discretionary income.
As chief compliance officer for a corporate owner of for-profit colleges, Robert S. Eitel spent the past 18 months as a top lawyer for a company facing multiple government investigations, including one that ended with a settlement of more than $30 million over deceptive student lending.
Today, Mr. Eitel — on an unpaid leave of absence — is working as a special assistant to the new secretary of education, Betsy DeVos, whose department is setting out to roll back regulations governing the for-profit college sector.
It appears that the only thing the Trump administration wants to teach you is: if you’re not rich we’re going to screw you.