There is quite a lot going on right now when it comes to student loans. It seems that every month there’s a new bill or a new rule that could significantly impact student loan borrowers. But keeping track of it all can be a bit overwhelming.
First, a very brief overview of how law-making works. Our legal and political system is multi-layered and may seem complicated, but I’ll break it down for you:
- Legislation – or a proposal for a new law – must be passed by a law-making body like Congress (at the federal level) or a state legislature (at the state level). Congress, and most state legislatures, have two chambers – the House and the Senate – and legislation must pass both chambers, and be signed by the President (or a Governor) to become law.
- Regulations (also simply called rules) can be created by executive agencies, such as the U.S. Department of Education. Agencies have broad powers to issue new rules or regulations under existing statutes, which can dramatically impact programs that were already created by previous legislation. When agencies create new rules or regulations, they have to follow a formal process before they can go into effect, but they do not typically require approval by Congress (or an equivalent state legislature).
So, with the above in mind, here’s my overview of the most important developments during the last few weeks.
U.S. Dept. of Education Issues New Rules for Defrauded Students
In 2016, during the final months of the Obama administration, the U.S. Dept. of Education issued comprehensive regulations governing a new student loan forgiveness program for borrowers harmed by colleges that duped them with false promises about the quality of their educational programs and their career prospects. However, under Secretary Besty DeVos, the Dept. of Education has been actively undermining those rules. This week, DeVos announced the creation of new regulations to replace the old ones. The proposed changes would drastically limit the ability of defrauded students to seek debt relief, and would substantially increase their burden of proof to show they’ve been harmed. The rules have not gone into effect yet, but they could as soon as 2019.
Congress Has Taken No Action on the PROSPER Act
Last year, members of the House of Representatives (and their allies in the Senate) filed a major bill called the PROSPER Act. The bill would completely reshape student loans and financial aid. Among other changes, it would repeal Public Service Loan Forgiveness and most income-driven repayment plans (although current borrowers would effectively be “grandfathered in”). As of a few weeks ago, the bill has gone nowhere and very likely could be dead, at least for the remainder of this legislative session. Rumor has it that Republicans (who control both the House and the Senate) don’t have enough votes for it to pass.
House Democrats Propose “Free College” Bill
House Democrats have introduced a bill – called the Aim Higher Act – that would provide free college for two years to students across the country. This is seemingly in direct response to the PROSPER Act (described above). The proposal has not yet been scored by the Congressional Budget Office, so we don’t know what the cost of the bill would be, but since the Democrats do not control the House, it has no chance of passing this session. However, it will be interesting to see what happens if the House changes hands following the November elections.
Massachusetts Takes Major Steps to Protect Student Loan Borrowers
There’s a lot happening in Massachusetts. The Supreme Judicial Court has approved new state court rules that require private lenders suing student loan borrowers to produce more documentation to prove the debt is valid. This is likely in response to widespread reports of lenders suing student loan borrowers without having sufficient documentation. Meanwhile, the Massachusetts State Senate unanimously passed the Student Loan Bill of Rights (which establishes new protections for every student loan borrower in the Commonwealth) as well as the Debt Collection Fairness Act (which shortens the Statute of Limitations and adds more protections for borrowers subject to collections and wage garnishments). However, it’s unclear at this time if either bill will become law. Stay tuned.