The issue of student debt has been a key one on the Democratic side of the presidential campaign (not the Republicans who like to accentuate the stress without actually doing anything about it), but the Obama Administration has been taking what actions it can – in face of Republican obstruction in Congress to accomplish anything that would improve the lives of working Americans- to help Americans manage their student debt. The White House issued a Fact Sheet detailing these actions.
Higher education is one of the most important investment individuals can make for themselves and for our country. Today, 11 of the 15 fastest-growing occupations require a postsecondary education. That’s why the President has made historic investments to help millions of Americans afford college by doubling investments in grant and scholarship aid through Pell grants and tax credits, keeping interest rates low on federal student loans, and creating better options to help borrowers manage debt after college like the Pay as You Earn (PAYE) plan.
As detailed in a new post on student debt trends and state-by-state data being released by the Council of Economic Advisers, these efforts are paying off. More students are graduating college than ever before. More than four of five Direct Loan recipients with loans in repayment are current on their loans. Delinquencies, defaults, and hardship deferments are all trending downward, with nearly three million borrowers successfully accessing a pathway out of default through loan rehabilitation since 2010. And more students are taking action on their student debt when they need support, with nearly five million Direct Loan borrowers taking advantage of repayment options like the President’s PAYE plan, which caps monthly student loan payments at 10 percent of income, up from 700,000 enrolled in 2011.
Many students access student loans to help finance their education; typically, that investment pays off, with bachelor’s degree recipients earning $1 million more in their lifetime and associate’s degree recipients earning $360,000 more, compared to their high school counterparts. But for some, burdensome student loan debt can present a challenge as they seek to start a career, raise a family, purchase a home, start a business, or save for retirement.
Guaranteeing strong consumer protections and building a system of high-quality customer service are important components of a federal student loan system that expands college opportunity and provides reassurance to American families that pursuing a college degree and responsibly borrowing to pay for college will not threaten their future financial security.
The White House has just announced new actions while highlighting the progress already made to help ensure the more than 40 million Americans with student loan debt understand their repayment options and access high-quality customer service, strong consumer protections, and targeted support to repay their student debt successfully.
New Actions on Student Debt
Over the past few years, the Administration has stepped up efforts to ensure that flexible repayment options are available to support Americans with federal student debt. Today’s actions build on that progress and provide a roadmap to guide and support borrowers as they seek to manage and repay their debt successfully:
- New Goal to Enroll 2 million More Borrowers in Plans like Pay As You Earn (PAYE).The President’s PAYE and related income-driven repayment plans are available to help borrowers who may be struggling to manage their debt effectively. Yet, too many borrowers still do not know about this important option. Leveraging key improvements in loan servicing and customer service, better tools and resources, targeted outreach to borrowers, and partnerships with key external organizations under the Student Debt Challenge, the Administration is announcing a new goal to enroll two million more borrowers in plans like PAYE by this time next year.
- Launch of StudentLoans.gov/Repay. To help borrowers easily navigate the complexity of student loan repayment options, the U.S. Digital Service and the Department of Education’s Office of Federal Student Aid have launchedStudentLoans.gov/Repay to help drive students to their best repayment option in five steps or less. Built mobile-first, and using human-centered design,StudentLoans.gov/Repay was designed to make repayment information as easy to understand as possible.
- Strengthening Consumer Protections through New Standards for Student Loan Servicing. The Department of Education and Department of the Treasury – after consulting with the Consumer Financial Protection Bureau (CFPB) and their work with Illinois Attorney General Lisa Madigan and other state attorneys’ general – have developed clear student loan borrower rights and protections in three key areas: (1) providing accurate and actionable information about account features, borrower protections, and loan terms; (2) establishing a clear set of expectations for minimum requirements for communication and services provided by student loan servicers, including adequate and timely customer service; and (3) holding servicers accountable for fixing errors, being responsive to borrowers, and resolving problems by ensuring that borrowers, federal and state agencies and regulators, and law enforcement officials have access to appropriate channels of recourse when violations of federal or state consumer financial laws occur. The Department of Education will ensure all borrowers with federal Direct Loans can rely on high-quality service in line with these standards and protections. The Department of Education will implement this effort as part of its new vision for servicing student loans.
- Better Information to Help Borrowers Take Action on their Debt: CFPB Prototype Student Loan Payback Playbook. The CFPB is seeking comment on a new set of student loan servicing disclosures—a student loan Payback Playbook – that provides borrowers personalized information to better understand their repayment options and find a monthly payment they can afford. To help borrowers choose the best repayment plan with the most up-to-date information based on their circumstances, borrowers would see a plain language Playbook on their monthly bill, in regular email communications from their student loan servicer, or when they log into their student loan account. The Department of Education, working with the CFPB, will be finalizing and implementing these disclosures for federal loans borrowers.
- Ensuring Effective Student Loan Counseling. The Department of Education will work to improve the timing and content of current loan counseling efforts, including statutorily required entrance and exit counseling, to help students make better borrowing decisions, increase college completion, promote successful loan repayment, and reduce delinquencies and defaults. Specifically, the Department will upgrade and redesign its Entrance and Exit Counseling tools on StudentLoans.gov – which serves 6.5 million students a year – based on user analytics and direct input from more than 500 borrowers, financial aid administrators, policymakers, and higher education organizations. The Department is also developing a loan counseling experiment to rigorously evaluate the effectiveness of different counseling tools and the impact of offering borrowers more frequent information and guidance beyond the statutorily required one-time entrance and one-time exit counseling.
- Leveraging Research to Drive Better Student Outcomes. The Department of Education will pilot Advancing Insights through Data (AID), a research partnership program that will offer other federal agencies and affiliated researchers data access to conduct research that can inform and advance policies and practices that support students’ postsecondary success and strengthen repayment outcomes for borrowers. Starting with Federal Reserve Board researchers this fall, the program will allow experts to apply to securely access and match administrative student aid data files with other survey and administrative data, while ensuring safeguards are in place to protect the privacy of students and families. AID builds on the Administration’s recent efforts to leverage government data in ways that can improve service delivery, promote transparency, and strengthen accountability, particularly through the College Scorecard, which includes the most comprehensive, reliable data ever published on students’ post-college earnings and repayment outcomes. The Department is also exploring future opportunities for new research partnerships.
- Modernizing Credit Reporting for Student Loans To Ensure Fair Treatment Of Borrowers. The Department of Education and the Department of the Treasury, in consultation with the CFPB, are working collaboratively with the credit reporting industry to develop guidance for servicers, lenders, and others who furnish data to the credit bureaus to determine how best to report student loan data so that it is fair, consistent, and accurately reflects repayment activity. This effort is another critical part of the Department’s new vision for servicing student loans.
- Over 40 new student debt challenge takers.Earlier this month, the White House issued a call to action for colleges, universities, non-profits, businesses, state and local governments, and other employers to help more borrowers better understand their options, and to take action to enroll those borrowers in PAYE and related plans so they can manage their monthly payments and avoid delinquency and default. There is a growing list of commitments from organizations working to inform their employees and members about PAYE and related plans, train human resources (HR) staff on the importance of helping borrowers understand their student loan repayment options and the steps individuals must take to enroll, and use digital platforms to highlight PAYE and related plans. In the few short weeks since the Debt Challenge was launched, there have been over 40 commitment makers, and the Administration is encouraging more colleges, businesses, non-profits to take action. As of April 26, the list of commitments includes:
o ACCESS College Foundation
o Achieving the Dream
o American Student Assistance
o American Sustainable Business Council
o California State University, Long Beach
o California Association of Nonprofits
o The Century Foundation
o College Advising Corps
o College Forward
o College Greenlight
o Dyersburg State Community College
o Florida International University
o Friendship Public Charter School
o Indiana University
o Iowa State University
o Jobs for the Future
o Lake Area Technical Institute
o Lone Star College
o Marcus Foster Education Institute
o Marks and Associates
o Montana State University Bozeman
o Morgan State University
o National Housing Resource Center
o Natixis Global Asset Management
o New Haven Promise
o Operation HOPE, Inc.
o Parkway School District
o Pharr-San Juan-Alamo Independent School District
o Rutgers University – Newark
o Tennessee Technological University
o University of Pittsburgh
o University of Memphis
o University of South Carolina School of Medicine Greenville
o The Institute for College Access and Success
o The State University of New York
o University of Michigan – Ann Arbor
o University of Northern Iowa
o United Tribes Technical College
o Valencia College
o Young Invincibles