$1 trillion monopoly - Betsy DeVos will let one company handle all federal student loans
By: Peter McKay - VICE News
At a time when borrowers are increasingly struggling to pay off their debts, a new monopoly is coming to federal student loans that could be challenging for the debt-holders and risky for the government.
The Trump administration has put its stamp on a plan to consolidate servicing of more than $1 trillion in federal student loans. Where there used to be nine companies doing it, now there will be just one.
The idea is to save the government money and simplify customer service — goals initially pursued by the Obama administration in what would be one of the largest non-military government contracts. But critics worry that consolidating so much market power in a single servicing company is risky, with echoes of the too-big-to-fail institutions that fueled the 2008 housing crisis.
Education Secretary DeVos To Give All Student Loan Accounts To One Company; Strip Away More Protections
By: Ashlee Kieler - Consumerist
Education Secretary Betsy DeVos has made another sweeping change to the student loan system that consumer advocates claim favors student loan collectors over the American people repaying those loans.
The latest move from DeVos — who only weeks ago rescinded a number of student loan servicing protections put in place by the previous administration — will put all federal student loan servicing under the control of just one company starting in 2019.
There are currently nine student loan servicers handling these accounts for the federal government.
Late Friday afternoon, DeVos announced the upcoming changes via an amendment to the contracting process, which will see the student loan servicing contract awarded to just one of the following: Navient (the servicer spun off from Sallie Mae), GreatNet, or the Pennsylvania Higher Education Assistance Agency (PHEAA).
The Education Department on Friday took up an Obama-era plan to streamline federal student loan servicing by moving to a new, single platform for managing the loans of 43 million borrowers.
The department had indicated it might jettison the previous administration’s initiative, which was intended to simplify a system that consumer advocates have complained is overly complex and rife with poor customer service.
Choosing a single vendor to manage the loans also carries risk, as that entity would construct the most visible online government portal since the Affordable Care Act program website, HealthCare.gov.
One of the three remaining bidders for the contract is Navient, which was sued this year by the Consumer Financial Protection Bureau and two state attorneys general. The lawsuits claim Navient, the nation’s largest student-loan servicer, made serious mistakes at nearly every step of the collections process, which illegally drove up loan repayment costs for millions of borrowers. Navient denied any wrongdoing and is fighting the lawsuits.
By: Jordan Weissman - Slate
As part of its plan to slash the Department of Education's budget by some $10.6 billion, the Washington Post reports that the White House will propose ending the federal student loan forgiveness program for public sector and nonprofit workers, and lengthen the amount of time Americans will have to spend repaying their debts on income-based plans if they borrowed to get an advanced degree.
By: Jillian Berman - Marketwatch
The most educated generation in American history has something to say about the value of the U.S. education system.
Just 13% of millennials said they agree or strongly agree with that statement that “higher education today is fine how it is” in a survey released by Washington, D.C.-based think tank New America this week. What’s more, a whopping 79% said they disagree or strongly disagree with that sentiment.
But their parents and grandparents are much more optimistic. About 28% of baby boomers said they agree or strongly agree that our higher education system is fine and 39% of members of the silent generation said they agree with that sentiment.
By: Jillian Berman - New York Post
As director of the National Consumer Law Center’s Student Loan Borrower Assistance Project, Persis Yu spends her days doing pretty much exactly what her title implies — working on behalf of low-income student loan borrowers both helping them with their individual cases and advocating for laws and policies that would benefit them.
But for about six months last year, Yu found herself in a strange position: Advocating for herself as she worked to manage her own student loans.
Yu faced delays of several months as she tried to switch from one program that allowed her to pay her loans according to her income to a different income-driven plan. For a short period, her loans actually flipped into delinquency, a status which means you’ve missed a payment, because her servicer — the company the government hired to manage her federal student loans — took too long to apply a payment pause, known as an administrative forbearance, she was entitled to by law as she went through the application process.
Haunted by Student Debt Past Age 50
The experience of being crushed by student debt is no longer limited to the young. New federal data shows millions of Americans who are retired or nearing retirement face this burden, as well as the possibility of having their Social Security benefits garnished to make payments.
Americans age 60 and older are the fastest-growing age group of student loan debtors. Older debtors, many of whom live hand-to-mouth on fixed incomes, are more likely to default. When that occurs with federal loans, as happens with nearly 40 percent of such borrowers who are 65 and over, the government can seize a portion of their Social Security payments — even if it pushes them into poverty. About 20,000 Americans over the age of 50 in 2015 had their Social Security checks cut below the poverty line because of student loans, with poverty-level benefits falling even further for 50,000 others, according to a recent report by the Government Accountability Office.
By: Patricia Cohen - New York Times
The Education Department’s sweeping crackdown on fraudulent practices at for-profit colleges has stalled under the Trump administration’s appointees, several current and former department employees say.
Current and former employees, who requested anonymity for fear of retaliation, said tight restrictions have been put on staff members scrutinizing for-profit institutions, constraining their contact with other state and federal agencies without high-level approval — a contention a department spokesman denied.
Some state officials who had collaborated with the Education Department in bringing legal cases against for-profit schools say their joint work has ground to a halt. They also say they are troubled by an apparent slowdown in granting debt relief to students who were cheated.
By: Michael Corcoran - truthout.org
Zack’s Investment Research recently recommended that people buy stock for Navient (formerly Sallie Mae), the nation’s largest servicer of student loans. This may seem curious given that the company is facing a historic lawsuit filed on January 18 from the Consumer Financial Protection Bureau (CFPB), that alleges (in agreement with aggrieved student borrowers) that the company has “illegally cheated many struggling borrowers” for years through “shortcuts and deceptions.”
Organizers are cautiously optimistic the lawsuit may lead to relief and/or reform in the coming years. But this “heightened regulatory scrutiny over alleged anti-consumer practices” isn’t scaring investors, who remain bullish on student loan bullies. Navient’s shares outperformed expectations, benefiting from a 30 percent spike in its stock just as Donald Trump was elected president.
The 30 percent spike in Navient (Sallie Mae) stocks directly after the election of Donald Trump. Good news for Navient tends to be bad news for those suffering from the ever-worsening student loan crisis, which was already perilous before Trump and his education secretary Betsy DeVos started shaping policy, to the delight of predatory student lenders. DeVos has already cut consumer protections, notably reversing an Obama executive order on April 17 that put, as the New York Times reported, “great weight on a company’s track record when selecting student loan vendors” to service federal loans. This means the very same government that is suing Navient for “cheating borrowers,” is now unable to consider this when handing out massive contracts.
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