Dear Commons Community,
President Obama and USDOE Secretary Arne Duncan announced two new rules yesterday aimed at protecting student borrowers and helping to reduce some of the cost of going to college. As reported by The Huffington Post:
“College students will be shielded from some fees when accessing federal student aid funds, while borrowers with older student loans will be eligible for slightly more generous repayment plans under new rules the U.S. Department of Education finalized Tuesday.
The rule governing banking products on college campuses sought to reverse what consumer advocates have decried as the increasing monetization of the federal student aid disbursement system, in which banks and other financial services firms teamed up with colleges to levy fees on students wishing to access federal student loans and grants. Students are supposed to be able to receive their loans and grants without having to cough up money for the privilege.
The Education Department is now forcing colleges to restrict or ban certain fees, such as overdraft charges on some accounts. The federal Consumer Financial Protection Bureau is weighing new rules governing overdraft fees in the wider U.S. banking system.
The repayment rule enables borrowers with older loans to save a bit more money on their monthly federal student loan payments, reducing for some the required monthly payment from 15 percent of their discretionary income to 10 percent, with the possibility of loan forgiveness after 20 or 25 years of steady payments. The Education Department reckons the rule helps 5 million borrowers previously ineligible to cap their payments at 10 percent of their discretionary earnings; about 1 million existing borrowers, and another 1 million future borrowers, are projected to enroll.
Taken together, the two proposals represent an effort by the Obama administration to ease the cost of going to college. They come as Education Secretary Arne Duncan prepares to leave the department after presiding over a near doubling of federal student debt, and as consumer groups increasingly complain of a department that in many cases has not properly policed the colleges and financial companies making money off student aid recipients.”
These are small but helpful steps for student borrowers.