It seems if you want something in Washington to disappear these days, all it takes is finding a way to attach it to former President Barack Obama.
Although there were plenty of unnecessary and questionable changes made by No. 44 — especially under the cover of executive order — the unchecked rush to reverse anything and everything with Obama’s signature threatens to damage the actual good that came out of some of the actions.
One example of government doing something good was in efforts to reform the student loan debt collection process. It would have given those who owe — and that’s quite a few, given there is $1.3 trillion in outstanding student loans — the ability to manage their debts more easily.
The message of the new administration: Too bad.
With the ease of sending out a memo, Secretary of Education Betsy DeVos sank the hopes of college students and their parents that life would become a little easier for borrowers.
If it were as simple as decrying college graduates as irresponsible in paying off their student loans, this short-sighted move would be understandable. The problems that brought the entire student loan system to its current state run much deeper, however, and DeVos and company offer no ideas on how to address those problems.
For example, the education department’s own studies found service for borrowers was poor at best, often confusing, and sometimes just plain wrong. The federal government often relies on private companies — loan servicers — to answer questions from borrowers and to collect loan payments.
Many students were told to skip payments rather than student loan call center staff members taking the time to actually determine how to resolve problems the borrowers were having. There were many times borrowers were not warned about extra fees. Other times there were little or no efforts to work with borrowers to determine how much graduates could afford to pay.
The attorneys general of several states have maintained these private companies offer incentives to employees, not for being helpful but for quickly getting callers off the phone.
The result? Many borrowers stopped paying. It’s known in the financial world as being in default and right now that’s the status of more than $137 million in federally backed student loans. Every 29 seconds, another one gets added to the list.
Taxpayers end up covering the loss.
DeVos called the Obama-era changes inconsistent but offered no specifics or any ideas on how to fix a horribly broken system. It is surely coincidental the move came about a week after lobbyists for the student loan industry asked Congress to delay any changes to the way they do business. It is surely equally coincidental that one of the largest private companies handling student loans, Navient, saw a nearly two percent rise in the value of its stock the day DeVos’s memo hit the streets.
Businesses might be pleased, but don’t be surprised to see more loans go into default as a result and more and more students who are trying to do the right thing by paying off their loans instead struggling to stay afloat.
By now, we are starting to get the message.
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