Good News, Bad News for Consumers with Student Loans

The federal government has given and taken away key protections to consumers with student loans. Changes in department regulations and deals with the legislature will leave some borrowers cheering, and others shaking their heads.

Tuition Reimbursement Cards

The good news starts with current college students. On October 27, 2015, the Department of Education proposed new rules that would protect students from overdraft fees and other costs when trying to access their student loans.

Right now, many schools automatically deposit tuition reimbursement funds into debit or pre-paid cards, created and maintained by banks. When students overdraw their accounts, they can face up to a $37 overdraft fee, as well as burdensome penalties if the account stays negative.

The new regulation would cut back on fees associated with using campus cards, including ATM fees and transaction fees. In addition, colleges would have to provide students with a neutral list of options to receive tuition refunds. The student’s preexisting bank account has to be first on the list, and the default option. Education Undersecretary Ted Mitchell told the Washington Post:
“The regulations will help protect students from unreasonable account fees, safeguard taxpayer dollars, provide transparency.”

REPAYE Loan Repayment Plans

Paying back your student loans may have just gotten easier too. The Department of Education has expanded a student loan repayment plan called, Pay as You Earn (PAYE), to include all loans made directly by the government. The revised plan, called REPAYE, caps participants’ monthly student loan bill at 10 percent of their income. After 20 years of payments (25 years for graduate degrees), any remaining balance is forgiven.

Auto-Dialers, Cell Phones, and Student Loans

Now for the bad news. Part of a tentative budget deal between the Obama Administration and the legislature makes it easier for student loan debt collectors to harass consumers who are past due. The deal authorized the use of auto-dialers to borrowers’ cell phones.

As of June 2015, $111.4 billion in federal student loans were in default. That’s 6.9 million borrowers behind on their student loan payments. Under the new deal, those borrowers will be left vulnerable to abusive debt collection practices banned elsewhere in the industry.

The federal government has drastically changed protections for millions of Americans facing student loan debt. It has given protection from fees and provided a way out, but it has also allowed collections agencies to torment borrowers. All in the hopes of bringing a little more money into the federal budget.

Dani K. Liblang is a consumer protection attorney at The Liblang Law Firm, P.C. She helps people behind on their student loans end creditor harassment. If you know someone facing overwhelming student loans, contact The Liblang Law Firm, P.C., today for a free consultation.