Revoked policy memos end student loan protections

On April 11, Secretary of Education Betsy DeVos withdrew a series of policy memos issued by the Obama administration that were designed to protect student loan borrowers. These policies mandated that the Department of Education review lenders’ past conduct before awarding them contracts, which allows it to collect payments on behalf of the agency.

The policy memos also required that the contracts contain extra protection for students. Removing the existing guidelines complicates the ongoing process of selecting a single lender through which the government will service its student loans, thus putting the financial stability of millions at risk.

Currently, the federal government uses nine loan servicing companies to collect student loans. Problems involving mismanagement and delays prompted the Obama administration’s plan to select a single servicer, allowing borrowers to use one portal to access their accounts and complete a standardized set of forms. In October, three finalists were chosen: Navient, FedLoan, and Nelnet and Great Lakes. Navient, the largest student loan provider in the nation, is currently in legal trouble regarding its practices, making DeVos’ decision even more concerning.

Lawsuits filed against Navient claim the company put its own interests before the well-being of borrowers, steering them toward repayment strategies that allowed the company to collect billions more in interest payments. Lending to more than 12 million clients and handling $300 million in student loans, Navient services more than 25 percent of student borrowers, making its predatory behavior even more serious.

Experts view Navient’s misleading strategies as one cause of the $1.4 trillion of student loan debt currently owed, a burden which has hampered the careers and personal lives of millions of Americans. The rapidly increasing levels of student debt have forced many to postpone major economic milestones, increasing economic inequality, stifling innovation and lowering birthrates. This should be concerning to Tulane students. In 2016, 37 percent of Tulane graduates had federal student loans, with the average owing $26,412.

The withdrawal of the Obama-era provisions eliminates the incentive for companies to have fair and transparent practices, as their track records no longer affect their ability to secure lucrative government contracts. Though DeVos claims that she withdrew the memos because of their effect on taxpayers, the guidelines did not directly affect tax policy in any way.

Loan defaults hurt taxpayers.

If DeVos was truly interested in the economic well-being of Americans, especially those with student loans, she should hold servicers accountable for policies that put the financial future of the country at risk.

This is an opinion article and does not reflect the views of The Tulane Hullabaloo. Madeline is a freshman at Newcomb-Tulane College. She can be reached at [email protected]