Erase Student Loans? Administration Plans Broaden Possibilities

Policy
Posted By Eliana Osborn on August 17, 2016 at 7:43 pm
Erase Student Loans? Administration Plans Broaden Possibilities

The Obama Administration’s vision for higher education includes better protection for student loan borrowers. After high-profile school closures in 2015, the Department of Education recently announced changes to guidelines for forgiving student loans. The response on the loan discharge plan during the public comment period on the rules was overwhelming: More than 10,000 comments rolled in before the Aug. 1 deadline.

The simplified loan forgiveness steps make it easier for students to file for relief and broaden the range of situations where they are eligible. A school can be charged with misrepresentation—of graduation rates, employment data, or other numbers—and borrowers can make a claim for loan discharge. This spells good news for students today and in the future, as well as consumer advocates.

On the other side of the equation, concerns mount about the new policy making it too easy to escape student loan obligations. School leaders worry about being held accountable for what anyone says on behalf of their institutions, even a tour guide stating optimistic rather than realistic statistics.

What the loan discharge comments say

The breadth of comments reveals the personal stories of the thousands impacted by student loans gone wrong. Some writers defend their for-profit institutions that have been forced to shutter because of enhanced regulation of finances. Others are passionate generally without focusing on specifics.

The Education Department announced other changes to the student loan system in July with an emphasis on customer service and enhanced protections. All these policy changes flow together to change the balance of power in the industry. As it stands now, student loans are a form of debt nearly impossible to get rid of through channels other than repayment.

The Student Aid website from the Education Department has a frequently asked question (and answer): “I was very young when I borrowed this money. Do I still have to pay? Yes.  The fact that you didn’t fully understand the implications of getting a loan, or the fact that it’s been many years since you signed for the loan, does not mean that you do not have to pay.”

The necessity of such information, as well as information on the few ways to discharge debt (through death, permanent total disability, or school closure) are evidence of the need for change. A group called Americans for Financial Reform commented on the proposed discharge guidelines, comparing student loans to the subprime mortgage crisis. Both situations target vulnerable populations, use high pressure tactics, and involve lobbyists to promote favorable legislation. AFR and others support automatic discharge of loans rather than making students at closed schools go through an application process.

A final ruling is expected in November to establish protocols for loan discharge eligibility.

Eliana Osborn
Eliana Osborn is an associate English professor at Arizona Western College, with degrees from Brigham Young University and Northern Arizona University. She’s published widely in forums such as The New York Times, the Washington Post, the Christian Science Monitor, and the Chronicle of Higher Education.

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