There’s a lot going on right now in student loan news. Let’s get right to it.
New York State Will Offer Free College – With a Catch
New York is poised to become the first state in the country to offer free college tuition to its residents. Families who make $125,000 or less would be eligible for tuition-free college at all SUNY and CUNY campuses. This has the potential to benefit up to a million families. But there’s a catch – students who benefit from this initiative will have to live and work in New York for several years after graduating. If they don’t, the “free” tuition will be converted into loans that must be repaid. This has some borrower advocates concerned.
Lawsuits Continue Against Navient and the U.S. Dept. of Education
There are multiple lawsuits pending against Navient – one by the federal Consumer Finnacial Protection Bureau (CFPB) alleging widespread irregularities in student loan servicing, and others by state attorneys general accusing Navient of predatory lending practices. Several private organizations have also filed suit against the U.S. Dept. of Education and FedLoan Servicing/PHEAA for inconsistent and unfair treatment of Public Service Loan Forgiveness borrowers. All of these lawsuits are in the early stages, so there’s been no final outcome. But their conclusions may have significant impacts for student loan borrowers across the country.
Betsy DeVos’s Education Department Re-imposes Collections Costs, But…
In one of her early moves as the new Secretary of Education under the Trump administration, Betsy DeVos rescinded Obama-era guidance that prohibited certain loan guarantors from imposing massive penalties on defaulted federal student loans when a borrower quickly takes steps to resolve the defaults. However, despite this concerning move, several student loan guarantors and collectors said they would ignore the new guidance and continue to voluntarily waive these costs in the early stages of default. Just this week, though, DeVos reversed yet another Obama-era directive that was designed to protect student loan borrowers from poor servicing.
New Problems With IDR Recertification
Borrowers looking to establish or renew their income-driven repayment plans like IBR, PAYE, and REPAYE are going to have new problems to contend with. The IRS data retrieval tool, which allows borrowers to apply for these programs online and pull their income information directly from the IRS database, has been down for several weeks already, and it looks like it’s going to be out of commission for much of the rest of 2017. The system was taken down because of privacy-related concerns. This means that most borrowers will need to send in paper applications – increasing the chances of servicer-related errors, delays, and processing problems. Not good.
Defense to Repayment Regulations Are Safe – For Now
Last year, the Obama administration passed final regulations that allow federal student loan borrowers who were defrauded by their schools to petition the government for relief, including loan forgiveness, through a program called Defense to Repayment. There was widespread concern that the Trump administration would try to quickly roll back those new regulations. However, the deadline for quick action has now passed, and the regulations are scheduled to go into effect this summer. The Trump administration could still try to change or eliminate the new regulations, but with the “rapid removal” deadline now expired, they will have to go through normal regulatory procedures, which could take years. So for now, borrower defense appears to be safe and on track.