Education Department rolls back Obama-era student loan reforms

On Tuesday, Education Department Secretary Betsy DeVos instructed the office responsible with providing financial aid to college students to disregard policy memos issued late in the Obama administration.

In a letter to James W. Runcie, Chief Operating Officer of the Education Department’s Federal Student Aid Office (FSA), DeVos directed the office to withdraw several Obama-era memorandums which were intended to help debt-ridden students manage or evade the repayment of debt.

“The guidance from the last administration resulted in a process that involved moving deadlines, changing requirements and a lack of consistent objectives,” a statement by the Education Department read.

Largely revolving around debt service, the Obama-era regulations were aimed at curbing alleged abuse in the collection of debt. ¬†DeVos said the Obama administration’s guidelines were riddled with inconsistencies and withdrew the regulations.

Described by the Obama White House as “systemic mistreatment,” the guidelines issued were intended to target debt servicers rather than those in debt. Currently, the federal government contracts with nine debt-servicing firms to handle the collection of payments.

Massive student debt during Barack Obama’s presidency prompted the previous¬†administration to offer the regulation, which would have streamlined the student loan process by allowing borrowers to access their accounts through a single entry-point run by the Education Department.

Roughly 8.7 million students defaulted on college loans between 2009 and 2017.  The federal government spends $800 million annually to collect over $1.1 trillion in unpaid post-secondary school debt.

 

[Bloomberg] [New York Times] [Photo courtesy AFP/Getty Images via NPR]