Obama Administration Proposes Bill of Rights for Student Borrowers

The Obama administration announced plans on Tuesday to expand protections for student loan borrowers, reported The Chronicle of Higher Education. In remarks at the Georgia Institute of Technology, President Obama unveiled a Student Aid Bill of Rights with an accompanying Presidential Memorandum that contains several directives aimed at making loan repayment easier and more equitable.

The executive actions would require the U.S. Education Department to create a new online complaint system by next July that allows students and borrowers to file grievances against federal student loan lenders, servicers, collection agencies and colleges and universities.

Under Secretary of Education Ted Mitchell told reporters Monday that students and borrowers would have the ability to track what is happening with the status of a complaint, according to Inside Higher Ed. He also said that the department would use aggregate data from the complaint system to judge the performance of its loan servicers, in addition to the current metrics it uses.

Additionally, Obama asked the department to study how to collect and resolve complaints against colleges, including potentially referring them to enforcement agencies when an institution makes misleading claims about job placements, for example.

The proposal would establish a central portal where federal borrowers can view information about all of their loans, regardless of their servicer. It would also require loan servicers and debt collectors that work under contract with the department to provide "enhanced disclosures and stronger consumer protections" throughout the repayment process, and ensure that prepayments are first applied to loans with the highest interest rates. Debt collectors would need to ensure that their fees are reasonable and to help borrowers return their loans to good standing, among other things.

In addition, the executive actions would direct President Obama's cabinet and advisers, along with the Consumer Financial Protection Bureau, to study whether consumer protections recently applied to mortgages and credit cards should be extended to student loans. The agencies would also be charged with recommending statutory and regulatory changes for all borrowers, "including possible changes to the treatment of loans in bankruptcy proceedings and when they were borrowed under fraudulent circumstances," according to a fact sheet released on Monday.

The announcement comes just over a week after the department canceled its contracts with five debt collectors, citing inaccuracies in the information they were providing borrowers. The department has been under pressure from consumer groups, members of Congress, and its own inspector general to step up its oversight of the organizations, or bring debt collection in-house, the Chronicle reported.

 

Related Links

White House Fact Sheet

http://www.whitehouse.gov/the-press-office/2015/03/10/fact-sheet-student-aid-bill-rights-taking-action-ensure-strong-consumer-

The Chronicle of Higher Education

http://chronicle.com/article/Obama-to-Expand-Protections/228353

Inside Higher Ed

https://www.insidehighered.com/news/2015/03/10/obama-administration-will-create-student-loan-complaint-system-centralized-payments