Despite regulations established by the now former president, student loan debts continue to rule. Delinquencies remain a serious problem as most borrowers are behind on their payments. Since 2013, the average past due balance increased by 17 percent. Currently, 42.4 million people in the United States have student loan debts exceeding a combined $1 trillion.
Two years ago, the Obama administration ordered debt collectors to stop charging high interest rates (some up to 16 percent) on overdue loans. Many were issued by the Federal Family Education Loan Program (FFELP). For borrowers to qualify for this exemption, they had to enter the government’s loan rehabilitation program within 60 days of defaulting.
In spite of those efforts, collectors are ignoring those mandates and continuing to impose significant financial penalties.
A new president being sworn in brought new rules or a return to the old ones. On March 16, the Department of Education revoked the guidelines. Secretary of Education Betsy DeVos instructed guarantee agencies to continue collection efforts on defaulted student loan debts.
MarketWatch notes that the new regulations will affect a small number of borrowers. In 2010, the Department of Education began issuing new federal student loans free of collection fees charged to borrowers, provided that they agree to resolve defaults.
At the same time, FFELP discontinued bank-based federal student loans. However, 16 million people who took out loans before the Department of Education took over now account for nearly half of the nation’s entire defaulted debts.
FFELP now has free reign over a large canvas to collect from. Equally concerning is not just the return of highly aggressive collection actions. Borrowers once again face the specter of significant fees being imposed, this time free of government intervention.