Welcome to Student Loan News, a weekly summary of developments and events affecting college debt in the U.S. Join us each Friday for a look at goings-on that could impact your own student loan situation.
Government education watchdog faults Federal Student Aid
The inspector general tasked with auditing the Department of Education issued a report this week criticizing the oversight — or lack of oversight — of federal student loan servicers.
Specifically, the report said that when some servicers failed to inform borrowers about all their options or incorrectly calculated income-driven repayments, the Education Department’s Federal Student Aid office didn’t adequately track the problems or punish servicers for noncompliance.
By letting servicers off the hook, the report said, the FSA office was giving them no incentive to fix the problems. “Further, FSA’s not holding servicers accountable could lead to servicers being paid more than they should be (the contracts with servicers allow FSA to recover amounts paid for loans not serviced in compliance with requirements).”
The report notes that the FSA office “strongly disagreed with the overall conclusion” of the audit, which covered a period from January 2015 through September 2017, but said “it already had or will implement” the inspector’s recommendations to hold servicers more accountable.
How it affects YOU: If you’ve been following this issue, the report’s finding might not come as much of a surprise. While not all student loan servicers are derelict in their duties, some have definitely been the subject of the complaints laid out in the inspector general’s report.
If you feel you’ve been misled about your federal student loan options or are paying more than you should be, you can file a complaint and demand your rights as a borrower. Meanwhile, we’ll see if this latest exposure of problems within the student loan system results in any improvement.
Much ado about FAFSA
You might remember from last week that U.S. Sen. Lamar Alexander, R-Tenn., has come out with a bevy of proposals to reshape financial aid and student loans. Some of these might have huge impacts if enacted, such as his idea to cut the number of federal student loan payment plans to two. (Not to mention his more controversial suggestion to deduct student loan payments from borrowers’ paychecks, a topic that finance columnist Zack Friedman wrote about this week, if you’re interested.)
But Alexander, who chairs the Senate committee in charge of education, is also pushing for more minor adjustments, including a plan to drastically trim the number of questions on the Free Application for Federal Student Aid. He says he wants “no more than 25” questions on the form, compared to the 108 he counts there currently.
And now others are getting into the act: Ivanka Trump, the president’s daughter and White House advisor, joined Alexander in a Facebook video that touts FAFSA reform as a highlight of the senator’s proposed changes to higher education aid. In the short film, Alexander holds a printed copy of the FAFSA, designed to show how long the form is, while Trump asks him to “explain the ridiculousness of this.”
The high profile for this specific FAFSA proposal suggests it may be a priority for Republicans when they meet with the Democrats to discuss reauthorizing the Higher Education Act, something both sides have indicated interest in doing this year.
How it affects YOU: So, this won’t exactly solve the student debt crisis, but let’s look at what it will do. Currently, the Education Department says completing a FAFSA takes “most people less than an hour” to compile the needed information and fill out the form, though some claim the aid application itself can be dispatched in as little as four minutes.
Assuming the number of questions drops to 25, or about 23% of the current total Alexander cites, then if the old form took an hour, the new form would take about 14 minutes. So, under this planned reform, you would save about 46 minutes a year.
Also in the news …
- A bipartisan bill to beef up U.S. government support for historically black colleges and universities has made it through the Senate and looks set for a vote in the House by the beginning of March, Politico reported Thursday. The proposed legislation would have relevant agencies create annual plans to help support HBCUs.
- And there’s another student-related bill with bipartisan support: U.S. Sens. Mark Warner, D-Va., and John Thune, R-S.D., announced Wednesday the introduction of their Employer Participation in Repayment Act, which, if passed, would “allow employers to contribute up to $5,250 tax-free to their employees’ student loans.” While some companies already offer student loan repayment assistance to their employees, formal federal laws around such programs could help make them more commonplace, the senators said.
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