For college bound students in the U.S., when it comes to reforming the way you pay back your loans, you can now expect less from the Department of Education. On Tuesday, education secretary Betsy DeVos ordered a withdrawal from an Obama plan that called for the government to incentivize “high quality, transparent and consistent servicing for borrowers,” and create “meaningful consequences for vendors who come up short.”
Nevertheless, DeVos sent a note to the Federal Student Aid office to revoke the plan.
This process has been subjected to a myriad of moving deadlines, changing requirements and a lack of consistent objectives. We must promptly address not only these shortcomings but also any other issues that may impede our ability to ensure borrowers do not experience deficiencies in service. This must be done with precision, timeliness and transparency. She then makes it clear that she wants each referendum made by the Obama administration revoked.
As reported by the Washington Post, the Obama plan was outlined last year in response to complaints to the Consumer Financial Protection Bureau (CFPB). Those complaints included charges of misplaced paperwork, unexpected charges to accounts and delays in payment processing, all while millions of borrowers defaulted on their loans. To address the problem, Obama’s education secretary John King wrote three memos to the Federal Student Aid office, making a long list of requests that sought to improve customer service. One demand was that companies be encouraged to help borrowers avoid delinquency.
Betsy DeVos Is Rolling Back Student Loan Regulations From the Obama Administration
That particular section of a memo (from the Obama administration) read, FSA should provide targeted incentives based on the performance of borrowers identified by FSA as being at a greater risk of default when they separate from school to help ensure at-risk (defined further in this document) borrowers achieve positive outcomes before reaching delinquency.
Altogether, DeVos’s action may set back students looking to take out loans by creating higher risk.
“In order to have accountability, there must be real consequences when servicers violate the law,” Alexis Goldstein, senior policy analyst at the progressive Americans for Financial Reform, told the Tribune. “DeVos’ actions today moves us away from true accountability, and creates dangers for the very student loan borrowers the department is responsible for protecting.”
The Tribune reports the withdrawals are hot on the heels of a $9 billion White House budget cut to the department of education.