The Bank on Students Emergency Loan Refinancing Act is dead.
We can debate all we like the wisdom of proposing legislation that calls for additional taxation on consumers rather than allocating a portion of the excess revenues from student loans (an exceedingly profitable and, arguably, perpetually sustainable enterprise).
In the meantime, here’s what can and should be done by the government—without the need for congressional approval—and by consumers who’ve once again been left on the side of the road without a way home.
What the Government Can Do
The administration can direct the Department of Education to disclose the terms and conditions of its student loan-servicing agreements. Why is that important? Because the problem isn’t just the amount of debt that consumer learners have undertaken, it’s the manner in which their loans are being administered by subcontractors and overseen by the department. (According to the Consumer Financial Protection Bureau, many borrowers continue to report difficulties with their student-loan servicers.)
To that end, performance measurements for servicers should be sharpened and special care taken to frustrate those entities’ attempts at gaming the system. For example, loans that have only been temporarily remedied (that is, put into deferment or forbearance) should continue to be noted in the servicing reports that are submitted to the Education Department, and the subsequent performance of those that have been permanently restructured or modified should be monitored as a discrete class. By reporting the figures more accurately, everyone can have a clearer picture of what percentage of student loans are in trouble.
The ED should also require that every single borrower is made aware of the various relief programs that are in place—not just those who are having difficulties or whom department officials believe are likely to experience that in the future. It’s been my experience that the most effective way to communicate important information to debtors is via correspondences they are most likely to read: the ones that contain their monthly invoices.
The president can also broaden the executive actions he recently took. In particular, the latest rendition of the government’s relief programs should be made available to all government-backed loan borrowers, whether or not the loans were previously consolidated, incorporated into precursor relief programs or, even, if the borrower is not now current with his or her monthly payments. Doing so will ensure that help is given to those most in need of it.
As important, the administration should direct the ED to require its subcontracted servicers to apply all the installment payments it receives in a specific order: first to principal, then to interest and, thereafter, to any unpaid fees. And any remaining funds from a payment—in all cases—should automatically be applied against the principal so that it’s no longer left to borrowers to direct an action that’s in their own financial interest.
What Borrowers Can Do
There are four things that borrowers should do as well.
Educate yourself. Know your rights when it comes to the billing and collections of your debts, and stay current on the latest relief developments. The ED’s student loan site can help with that. So, too, can the Consumer Financial Bureau and Federal Trade Commission sites with regard to the Fair Credit Billing and Fair Debt Collection Practices acts.
Put it in writing. Formalize your verbal directives and grievances.
Be relentless. If your issue is not being resolved to your satisfaction, elevate it to as many higher levels as you must until it is.
Raise your voice. Demand action on the preceding and file loan-servicing complaints with your congressional representatives. Also alert the agencies that regulate student-loan activity, particularly the CFPB, which maintains a portal that’s easy to use.
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