2016 has been a big year in student loan law. We saw the release of Revised Pay As You Earn (REPAYE), a new income-driven repayment plan for federal student loans, although its rollout and implementation were a bit of a mess. We saw a continued federal crackdown on predatory for-profit schools which resulted in the collapse of ITT Technical Institute. The Obama administration issued final rules on student loan forgiveness and debt relief for students who were defrauded by their colleges and universities. And finally, Donald Trump was elected to be the next President, leading to a great deal of uncertaintyabout the direction of student loan programs.
There’s never a dull moment when it comes to student loan issues, and as the year comes to a close, there’s still a lot going on. Here are some highlights.
U.S. Secretary of Education John King today took the final step in the government de-recognizing the troubled Accrediting Council for Independent Colleges and Schools (ACICS). King concluded that ACICS has “exhibited a profound lack of compliance” with its responsibilities as an accreditor. King’s decision means that colleges accredited by ACICS will have to find new accreditors if they want to consider receiving federal student grants and loans.
King’s action affirms prior decisions by the Department staff, by the Department’s National Advisory Committee on Institutional Quality and Integrity (NACIQI), and finally by King’s own chief of staff, Emma Vadehra, from whose September decision ACICS had appealed.
ACICS says it will go to federal court to try to get King’s decision overturned.
Navient Corp. lost out on a lucrative government contract to collect on defaulted federal student loans late last week, disappointing previously optimistic investors. The company has collected on such debt for nearly two decades, raking in tens of millions of dollars in annual revenue.
Wall Street had hoped that Navient would flourish under the incoming Trump administration, thanks to new federal contracts and the possibility that the government would retrench from the student loan business in favor of private lenders. Company shares advanced nearly 30 percent from Nov. 8 through Friday, ranking it among the 20 biggest gainers in the Standard & Poor's 500. However, shares were down more than 2 percent in early Monday trading in New York.
College debt has surged to alarming levels in the United States. Tens of millions of students owe enormous amounts. And many are defaulting.
Correspondent Mike Kirsch reports from California on the growing debacle of student debt.
A staggering 40 million students are in debt or have defaulted on their college loans in the United States. How much debt? Almost one and a half trillion dollars’ worth. And yet unlike failing Wall Street banks who declared bankruptcy during the 2008 recession, college students today are not offered this same kind of relief.
The U.S. Department of Education has two quite different roles in the lives of indebted former students. The same bureaucracy that must safeguard taxpayer dollars by collecting $1.1 trillion in loans also oversees the nation's largest-ever effort to forgive student debt.
These dual roles have culminated in a strange situation. The Obama administration has repeatedly promised that borrowers eligible to have their student loans cancelled would be reimbursed for "every penny." But for months, the Education Department has been actively working to collect on federal student debt owed by tens of thousands of former students at Corinthian Colleges Inc., which filed for bankruptcy in 2015 under a cloud of fraud investigations.
To recoup student-loan debt, the government is leaving people who rely on Social Security with benefits that fall below federal poverty guidelines, the Government Accountability Office said Tuesday.
The number of older Americans defaulting on education loans has steadily increased in recent decades, as many have returned to college or co-signed loans for family members. Unpaid debt has resulted in the government garnishing the benefits of 114,000 people age 50 and older in the past year, more than half of which were receiving Social Security disability rather than retirement income, the GAO report said.