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Trump Administration to Raise Late Feeds on Student Loans

By Dan Gagnon; Assistant News/Sports Editor
On April 17, 2017

Trump Administration to Raise Late Feeds on Student Loans

 

Dan Gannon

Assistant News/ Sports Editor 

drgannon@plymouth.edu 

 

The Trump Administration has raised late fees on student loan whose borrowers who miss several payments in a row to as high as 16% on interest charges. This reverses an Obama administration rule that debt collectors could not start charging high interest rates on overdue student loans. The previous rule also protected students from debt collectors from students who took out loans and entered The Government rehabilitation program within 60 days of loans if they were to default them, The Department of Education said. 

The reason for the increase on interest is to make up for fees on a borrowers balance. They spike also makes up for lost money and debts that go unpaid. A loan is considered defaulted, or unpaid after 270 days. Defaulting a loan means the borrower has not made a payment on a federal student loan within roughly nine months. You may also default a federal loan if you have not made payment plans with your lender, according to the Consumer Finance Bureau.

The change came after Consumer Federation of America did an analysis of recent graduates from 2014 to 2016. They found a growth between 2015 and 2016 of 14% between student default loans taken out from the old Federal Family Education loan or FFEL program. Currently, the Consumer Federation of America estimates that there are 16.4 million borrowers in this program who roughly owe $335.2 billion dollars. Overall, their data showed 42.3 million people owed $1.3 trillion dollars total in loans to the United States.

The Department of Education estimates that roughly 4.2 million people will be affected by this change, who currently owe an estimated $65.6 billion dollars. Anyone who has loans under the Direct Federal Loan program will not be impacted by any changes. The Department of Education estimates that the average student loan borrower owes an estimated $30,000 in student loans, which is a 17% increase from the average $26,000 in 2013.

In March, Sen. Elizabeth Warren (D-MA) and Rep. Suzanne Bonamici (D-Ore.) sent a letter urging the Education Department to uphold the Obama administration’s guidance on the collection fees, which they said “results in an unnecessary financial burden on vulnerable borrowers.”

The bill still has to go before the House before it can be passed. There have been roadblocks in the past however. In 2012, Brynna Bible took United Student Aid Funds to court after they charged her $4,547 in collection fees after she had defaulted her loan and entered a program to help set up a payment plan she could afford. USA funds still had assessed the collection fees and charged her for them anyways after the loan had been defaulted. Officials sided with Bible, which led to USA funds suing The Department of Education in 2015, which led to a $23 million dollar class action lawsuit known as the “Dear

Colleague” memo, the Washington Post reports. “The administration’s first move on the student loan default crisis will do nothing to stop the tidal wave of defaults that is sweeping across the nation,” said Rohit Chopra, a senior fellow at CFA and a former student loan ombudsman at the Consumer Financial Protection Bureau. “With more than 3,000 Americans defaulting on a student loan every day, this just adds insult to injury,” Chopra told The Washington Post.

The change has not yet been finalized but made it through the Circuit Court on March 16, and there are still negotiations that are on going about the change. 

 

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