US Department of Education Earns a Failing Grade

Each year hundreds of thousands of students either graduate or leave college with a massive amount of student loan debt. Recent reports are that 70% of all graduates have student loans with an average of more than $37,000 upon graduation. This is a never-ending cycle of personal debt that is fueled by the US Department of Education’s own policies and practices.


What’s even worse is that many borrowers find their income isn’t enough to keep up with their monthly payments so they struggle to stay afloat. While the Department of Education (DOE) has programs designed to help these people, the application processes and resources in place make it much too difficult for millions of these people to obtain the financial savings available to them.


Unfortunately, the DOE, led by Secretary Betsy DeVos, seems to be making things harder for student loan borrowers. For example, the DOE recently took steps to roll back protections for borrowers, and major student loan service providers are facing lawsuits after being accused of harming borrowers during the repayment process.


Here is a closer look at how the Department of Education (DOE) is failing the millions of Americans who carry student loan debt.


Complicated Repayment Plans


Borrowers are eligible to sign up for one of several repayment plans that could make their monthly payments more affordable. The process, however, can be complicated. First off, borrowers need to know which type of loans they carry to compare their options. With loan names such as Direct Subsidized or Unsubsidized Loans, Subsidized or Unsubsidized Federal, Stafford Loans, PLUS loans, or Consolidation Loans (Direct or FFEL), it’s easy to see why borrowers could be confused.


Next, they have to sort through the different repayment plan options, which include Extended Repayment Plan, Revised Pay As You Earn Repayment Plan (REPAYE), Pay As You Earn Repayment Plan (PAYE) Income-Based Repayment Plan (IBR) Income-Contingent Repayment Plan (ICR). While the names may sound similar, each plan can have a very different impact on a borrower’s finances.


And borrowers need to be aware that enrollment in these plans isn’t automatic, and they must recertify their eligibility every year for the Income Driven plans. Borrowers must also have a copy of their most recent tax return when they apply.


If understanding and following these steps wasn’t enough of a headache, it is now coming to light that student loan servicers are failing to notify borrowers of their options and are even steering them in the direction of more costly alternatives.


Student Loan Service Providers Are Facing Lawsuits


The federal government awards contracts with several companies who act as servicers for federal student loans. They oversee billing and other customer service tasks such as helping borrowers sign up for repayment plans and loan consolidation. In recent months, some of these loan service providers are facing lawsuits and accusations that they have failed to provide adequate customer service and have harmed borrowers in the process.


A class action lawsuit was filed against Great Lakes Educational Loan Services in April 2017 accusing the company of encouraging borrowers who are struggling financially to pursue forbearance instead of considering income-driven repayment options. Income-driven repayment plans could have either made payments affordable or even brought payments down to zero while still allowing borrowers to make progress towards loan forgiveness.


Another lawsuit was recently filed by the U.S. Consumer Financial Protection Bureau (CFPB) against Navient, who is the largest federal student loan servicer, contracted by the DOE. The company is accused of “systematically and illegally failing borrowers at every stage of repayment.” The CFPB further alleges that Navient misallocated funds and purposely directed borrowers into forbearance instead of recommending income-driven repayment plans.


Borrowers who feel they have received false information or poor customer service from these companies have few options. Borrowers don’t have the ability to select their loan service provider, and they don’t have the option to change companies if they are unhappy.


The Department of Education Might Have a Profit Motive Problem 


During the 2016 presidential race, then candidate Donald Trump told The Hill that he believes student loans are “probably one of the only things the government shouldn’t make money off — I think it’s terrible that one of the only profit centers we have is student loans.” In 2014, the Congressional Budget Office forecasted that the federal government would make a $127 billion profit from student loans over the next decade.


The Education Secretary at that time, Arne Duncan pointed out that profits from student loans helped the Department of Education cut its spending. The cuts just happened to be at the expense of millions of Americans who are drowning in student loan debt. If the Department of Education is using student loans to generate additional funds for its department, what motive do they have to truly help borrowers?


Chris Hicks, who runs the Debt-Free Future campaign for Jobs with Justice, a Washington-based nonprofit group, told The Huffington Post that he believes “the student loan program isn’t about helping students or borrowers — it’s about making profits for the federal government.”


President Trump’s Administration is Threatening to Take Away Protections from Borrowers


As if life wasn’t complicated enough for student loan borrowers, the Department of Education has taken recent steps to roll back protections issued under the Obama administration. Adam Minsky, an attorney whose practice is focused on helping student loan borrowers, told NBC News “[the Obama memos] alerted [student loan] servicers that how they deal with borrowers — the outcomes would be a factor in if they’re awarded a contract. And the idea there was to incentivize the servicers to work harder to help borrowers.” Current Education Secretary Betsy DeVos recently issued a withdrawal memo which has undone Obama’s efforts.


The Department of Education also seems to be going after the federal student loan forgiveness program. Currently borrowers who take certain public service jobs might be eligible to have their student loans forgiven after working for 10 years. Borrowers could previously submit a certification letter to FedLoan (another DOE contracted loan servicer) to verify if their employment qualified for loan forgiveness. Now the Department of Education is saying that borrowers cannot accurately rely on FedLoan to determine if they qualify for student loan forgiveness, and that the approval letters, which have already been sent to thousands of borrowers, are not legally binding. This could potentially impact over 550,000 borrowers who are already participating in a public service loan forgiveness program.


Student loan debt is certainly a burden that will haunt many former students for years to come, and the Department of Education seems to be showing little sympathy for those who are struggling. The department may oversee education, but when it comes to student loans, they’re earning a failing grade!

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