The U.S. Department of Education released a report regarding protection for student loan borrowers Thursday, Oct 1. In response to President Barack Obama’s Student Aid Bill of Rights, the report outlined a series of statutory, regulatory and administrative recommendations to safeguard student borrowers.
The bill was created with the assistance of the Department of Treasury and the Consumer Financial Protection Bureau.
“While we’re proud of the historic steps we have taken to protect student loan borrowers, there’s much more we all need to do,” U.S. Secretary of Education Arne Duncan said.
Schools need to do more to keep costs down and help students graduate on time; Congress needs to step up to hold schools accountable and provide better consumer protections; servicers owe borrowers better information about their options; and we, as a department, are continuing to work to strengthen oversight and improve our coordination across the administration.”
Included in the report were several recommendations to protect borrowers, such as allowing service members to consolidate their FFEL or Perkins loans into direct loans without losing their interest-rate protections under the Servicemember Civil Relief Act and eliminating the tax liability for student-loan discharges, including those related to Income Based Repayment and Income Contingent Repayment.
Leia McBroom, a freshman majoring in nursing, has high hopes for the department’s plans and believes that loans will always have an importance in the U.S. education system.
“I took out a MEFA loan because I needed help with paying for this year,” McBroom said. “(Obama’s plans) would help me because it would make it easier for me to pay off my loans after college. Loans are extremely important because they allow students to go to college even if they can’t afford it at the moment.”
The report included plans to restore Pell Grant eligibility for students with successful defense to repayment claims, as well as strengthen protections against predatory third parties that charge borrowers exorbitant fees for services they could access at no cost through studentaid.gov.
There are several types of loans available for students in the U.S. subsidized loans do not require the borrower to make payments toward the loan until after they graduate — the government will pay for the interest while the borrower is attending school. Unsubsidized loans require the student to pay the entirety of the interest; however, payments are usually postponed until after graduation. All students are eligible for unsubsidized loans, while receiving eligibility for a subsidized loan is more selective. Typically, students whose parents’ annual incomes are less than $50,000 receive them.
At FGCU, 42 percent of all students received eligibility to take out loans, with 60 percent of students receiving some sort of financial aid. The most recent three-year Cohort Default Rate — the percentage of a school’s borrowers in the U.S. who begin repayment on loans during a federal fiscal year — for FGCU students is 4.6 percent, even lower than previous year. It was 6.3 in 2011 and 8.2 in 2010, keeping in mind that 58 percent of FGCU students do not receive loans.
In addition to the department’s plan to protect borrowers, the federal government simplified the Free Application for Federal Student Aid in September. Once the new regulations go into effect next fall, incoming college freshmen who are a part of the class of 2021 can fill out FAFSA as early as October 2016, a far jump from the current rules that state that students who are entering school near September have to wait and apply in January. This will assist colleges in speeding up their individual aid decisions.
With the introduction of Obama’s plans and the expansion of FAFSA, college students across the country now have more opportunities to continue their education with or without financial assistance.