Trump Administration Rolls Back Obama Protections On Student Loans

Tyler Durden's picture

Just days after reports emerged that student loan defaults are soaring, which is undoubtedly due to some combination of, among other things, poor job prospects for the millions of snowflakes who graduate each year with their $200,000 educations in anthropology and the moral hazard created by liberal politicians constantly calling for student debts to be 'forgiven' (a.k.a. forcefully jammed down the throats of taxpayers), the Trump administration has revoked rules put in place by Obama that barred student debt collectors from charging penalty fees on past-due loans.

Originating from the Department of Justice, the "Dear Colleague" letter (full letter included at end of post) says that Obama's unilateral rules implemented in 2015 could have "benefited from public input"...but what good is being King if you can't unilaterally force new laws on the masses? Per the Washington Post:

The Education Department is ordering guarantee agencies that collect on defaulted debt to disregard a memo former President Barack Obama’s administration issued on the old bank-based federal lending program, known as the Federal Family Education Loan (FFEL) Program. That memo forbid the agencies from charging fees for up to 16 percent of the principal and accrued interest owed on the loans, if the borrower entered the government’s loan rehabilitation program within 60 days of default.

 

The Obama administration issued the memo after a circuit court of appeals asked for guidance in a case against United Student Aid Funds (USA Funds) challenging the assessment of collection costs. Bryana Bible took the company to court after being charged $4,547 in collection costs on a loan she defaulted on in 2012. Though she had signed a “rehabilitation agreement” with USA Funds to set a reduced payment schedule to resolve her debt, the company assessed the fees.

 

Education officials sided with Bible, prompting USA Funds to sue the department in 2015. Earlier this year, the company agreed to pay $23 million to settle a class-action lawsuit born out of the Bible case, though it did not admit any wrongdoing.

DeVos

 

Of course, it didn't take long for Elizabeth Warren to draft a letter to the Education Department urging them to not take away 'freebies' from America's entitled snowflakes.

On Monday, Sen. Elizabeth Warren (D-Mass.) and Rep. Suzanne Bonamici (D-Ore.) sent a letter urging the Education Department to uphold the Obama administration’s guidance on the collection fees, which they said “results in an unnecessary financial burden on vulnerable borrowers.”

 

“Congress gave borrowers in default on their federal student loans the one-time opportunity to rehabilitate their loans out of default and re-enter repayment,” the letter said. “It is inconsistent with the goal of rehabilitation to return borrowers to repayment with such large fees added.”

Of course, these new rules came just days after new data published by the U.S. Department of Education revealed that $137 billion of federal student loans were in default as of December 2016, a 14% year-over-year increase.  Key findings from the Consumer Federation of America:

Average amount owed is $30,650 per federal student loan borrower. Average amount owed per borrower continues to tick up, rising 17% since the end of 2013, when borrowers owed on average of $26,300.

 

$137 billion in default. For federal loans originated by financial institutions (FFEL) and the US Department of Education (Direct), a total of $137.4 billion in balances were in default, a 14% increase from 2015. This cumulative level of defaulted balances includes loans which defaulted in previous years. Defaulting on a federal student loan comes with severe consequences. Borrowers can face seizure of their tax refund, garnishment of their wages, and an inability to pass employment verification checks.

 

1 million Direct Loan defaults in 2016. In 2016, 1.1 million Federal Direct Loan borrowers defaulted. Federal law typically defines a federal student loan default as being 270 days past due. Borrowers defaulting for the first time slightly decreased compared to 2015, though borrowers re-defaulting slightly increased compared to 2015.

 Seems the cost of financing those spring break trips to Cancun just got a little costlier...sorry, snowflakes.

 

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guitarzaan's picture

Another imbecile puporting to know anything about American Law.  You're as full of shit and as disingenous as qe is, pd.

Learn how to use a search engine!

http://tpgurus.wikidot.com/peter-hendrickson

https://www.justice.gov/sites/default/files/tax/legacy/2007/05/02/Hendri...

http://www.leagle.com/decision/In%20FDCO%2020100610E01/U.S.%20v.%20HENDR...

The subject at hand is the sorry state of American Student Loan program and the fact that we finally have a President who is prepared to make some necessary changes to hold the debtors accountable for their bullshit.

Now Fuck off with your 'jd' from fakebook u!

Prisoners_dilemna's picture

Thank you for the ad hominems.

They don't address the refund checks the IRS has been issuing in reponse to educated returns for over 14 years now though.

 

"The revenue laws are a code or system in regulation of tax assessment and collection. They relate to taxpayers, and not to nontaxpayers. The latter are without their scope. No procedure is prescribed for nontaxpayers, and no attempt is made to annul any of their rights and remedies in due course of law. With them Congress does not assume to deal, and they are neither of the subject nor of the object of the revenue laws." United States Court of Claims, Economy Plumbing and Heating v. United States, 470 F.2d 585, at 589 (1972)

 

“Although all men are born free, slavery has been the general lot of the human race. Ignorant--they have been cheated; asleep--they have been surprised; divided--the yoke has been forced upon them. But what is the lesson?…the people ought to be enlightened, to be awakened, to be united, that after establishing a government they should watch over it....It is universally admitted that a well-instructed people alone can be permanently free.”

-James Madison

guitarzaan's picture

It would be ad hominem if it weren't true.  Are you a tax lawyer?  I think you're a fraud peddling bad advice which could land someone in jail if they were stupid enough to follow your 'sage' advice.

https://www.justice.gov/opa/pr/michigan-resident-sentenced-prison-crimin...

https://www.justice.gov/sites/default/files/tax/legacy/2009/10/28/phendr...

http://tpgurus.wikidot.com/peter-hendrickson

http://www.leagle.com/decision/In%20FDCO%2020120323G53/U.S.%20v.%20HENDR...

 

But, you know better, right?  Right.

QuantumEasing's picture

Are YOU an attorney? You certainly seem to think so.

And your knowledge of the Trivium is...awe inspiring. You need a shirt that says "I don't always debate, but when I do, I rely on logical fallacies."

Still waiting to hear about a SINGLE person indicted for following the letter of the law.

The Hendricksons were not indicted based on anything to do with CtC filings. They were indicted because the Gov believed their signatures to be "insincere" for a particular year's filings.

Yeah. Stench of desperation.

If CtC is unlawful, then there should be a bunch of court cases to cite. Instead of a long, long stream of refund checks. The fact that even ONE check was issued kind of scuttles the notion that it is unlawful.

But thanks for the vote of confidence that this is correct. It means alot.

Prisoners_dilemna's picture

Correct.

If you investigate the links I've provided you too will "know better".

Read Cracking the Code by Peter Hendrickson

 

guitarzaan's picture

You're full of shit and you're peddling shit.  Your hero hendrickson has a lengthy criminal record AND HE was prosecuted and convicted several times for his fraudulent and criminal acts.  So was his wife.  At a minimum, you should be severely censored for propagating bullshit and pretending to know anything about American Internal Revenue Code and American Law.  A simple search with duckduckgo reveals that your hero hendrickson and his wife are nothing more than two-bit, scumbag felons:

https://www.justice.gov/sites/default/files/tax/legacy/2007/05/02/Hendri...

http://www.leagle.com/decision/In%20FDCO%2020100610E01/U.S.%20v.%20HENDR...

http://tpgurus.wikidot.com/peter-hendrickson

The discussion at hand is the student-loan boondoggle in America and the justified anger of American Taxpayers at the corruption and bullshit taking place with said loans. 

Now Fuck Off, qe!

 

QuantumEasing's picture

I don't have heroes.

I'm not peddling anything. I'm not responsible for what you believe or disbelieve. I have nothing to prove to anyone, least of all a shrinking daisy such as yourself.

The information is freely given, as there are some on here that are inquisitive and skeptical.

Obviously, not you. You would have to double your IQ to get to room temperature.

Your links? Yes, wikipedia is known as the gold standard for unbiased information.

And I should be censored?! Go back to North Korea, troll shill. This ain't the Daily Kaos, or Huffing Poo. It's fight club. Read what I have to say, or MoveOn.org.

Take your own advice. With a side of FOAD.

guitarzaan's picture

You ARE a hero-worshipping tool, qe.  you are advocating the bullshit that is hendrickson, and that got him convicted in American Courts.  You are using his book as your bible in your lame attempt to browbeat and label the rest of us - who know and follow the laws in America - as 'tax slaves.'  What, are you collecting royalties for that fiction you are peddling for your master?!  ROTFLMAO@you!  Good luck in prison, doll!

http://tpgurus.wikidot.com/peter-hendrickson

https://www.justice.gov/sites/default/files/tax/legacy/2007/05/02/Hendri...

http://www.leagle.com/decision/In%20FDCO%2020100610E01/U.S.%20v.%20HENDR...

QuantumEasing's picture

Nope.

I am sharing the fact that I, personally, decided to reach down, find my balls, and stop whining about the Man doing bad things to me.

"Peddling" implies I am receiving compensation for this. Also false.

As much as you want to, you're not going to tell me I am wrong. The refund checks are not figments of my imagination.

If what I have done (for the past decade) is illegal, I would have expected the IRS to notify me of the fact. This also has not happened.

If you have a suggestion for a better method (other than "sit back and take it"), please share.

The fact that (as has become the norm) you are not rebutting the method, simply impugning the Author, is also a Troll tactic.

Again, I am NOT responsible for your beliefs, or decision to drink the Kool-Ade. The fact that you want me "censored" is all the proof required to know that you have a vested interest in the status quo. If it did not threaten you, you would simply choose not to read it, or read it, laugh, and keep going. Like a normal adult.

But the fact that you lost your shit over this...is telling.

And quite frankly, amusing.

guitarzaan's picture

You're right -- you shouldn't be censored.

SoDamnMad's picture

Take the losses on the Student loans defaults and add them to the ledger of the Dept of Education.  If you get into negative territory, do away with the Dept of Education. Meanwhile stop Student Loans. ALL Work out a solution which starts with going after the defaulters.   You start repaying or these fees and charges go on to your loan balance.

bigkahuna's picture

I agree with you - I believe Trump now needs to apply this logic to all of them who took taxpayer money and skated - like the tbtfs, the auto makers, the solyndras - yeah, all of them. Fairness.

lil dirtball's picture

> The issue is: Goobermint (and therefore the us tax slaves) should have absolutely nothing to do with backing/guaranteeing loans of any kind (including Student Loans).

If you choose to be a 'tax slave', serf, then you loose your choices as to where your 'money' goes and how it's spent because you gave it away; someone other than you will make those decisions without your input. So, sit down and have a nice big cup of STFU and please fill out your forms completely and turn them in before the deadline.

Yog Soggoth's picture

Exactly. You go to college to earn more money in the future. If you hand out free money (no such thing) the incentive to take applicable studies is severely diminished. If the colleges see a free meal ticket, they have no real competition and can charge whatever they want.

root superuser's picture

People already couldnt get out of student loans. THis is not about repaying student loans, but charging exorbitant colection fees when someone falls behind.

Bumpo's picture

The Millenials have to grow up some day. Trump is just making it clear:  

Cash, Ass or Grass. No one rides for FREE.

jeff montanye's picture

which was it that the banksters paid?  some of the cash the government gave them?  when do they pay (and go to jail)?  

ditto ditto the military industrial security false flag war machine ditto ditto ditto?

barroter's picture

Gotta protect those creditors!

chunga's picture

How are the snowflakes going to pay for somebody else's social security, medicair, etc.? Oh boy.

The Gun Is Good's picture

Yeah! Who'll pay for MINE? (Right there with ya on the /sarc/)

No methods for extracting meaningful labor from snowflakes have even been developed yet, for that matter.

I wonder what'll happen when the .Gov Magickal Ponzi Money-Go-'Round scheme goes full retard / AKA "Digital?"

There'll be some shit we ain't even seen yet! If they can turn bad debt into positive book entries (and call it "toxic assets" when the shit really starts to attract flies), who knows what they'll be pulling out of their asses and burying us with in the exciting future! (Weee motherfuckin' WEEEEE.....)

jeff montanye's picture

this certainly sounds like that.  higher education, imo, far from being "less vocational", mocked as womyn's studies and anthropology here, seems far more vocational than when i was in college '66-'70, majoring in english before an mba.  now most do business in some form as an undergraduate.  public education, particularly, used to be far cheaper as well.  imo, while president trump tactically may need to get control of the armed, investigative and clandestine services, from a strategic point of view we already spend far too much money on these and the blowback from their absurd, ongoing, wars on drugs and terror, whatever, that are really wars for themselves and israel, not even for international predatory capitalism as it used to be (united fruit, standard oil, citibank), see smedley butler.

as the hound in game of thrones notes, there is no safety you stupid bitch: http://www.thedailybell.com/news-analysis/there-is-no-safety-you-dumb-bi...

Doctor Faustus's picture

A degree in English is highly analytical. At least it was when I got one back in 1981. It has served me time and again in insurance, real estate, and the manufacturing of analytical instrumentation for power plant chemistry.

At one time, an English degree was an excellent pre-cursor for law school due to the rigorous, in-depth analysis of not only authors' works, but their lives, and the circumstances in which they produced their literature. Add in foreign authors, and you receive quite an education in areas far beyond literature such as economics, history, psychology, even science.

swmnguy's picture

Same here.  I left school short of a degree, in 1984, but the English Lit training I received has helped me every day since.  One of my younger sisters is an English prof now.  She assures me it's just as rigorous as it ever was, and the way she explains her expectations, I believe her.

ersatz007's picture

An English degree is no joke.  College level English courses are no joke.  I know nothing about womyns studies or other degrees which seem like fluff.  But not all college education is fluff.  To categorize it as such is likely because that person - like anyone who generalizes about something of which they have no first hand knowledge - parrots the posts they read here with no concern or ability for applying critical thought?. 

Pure Evil's picture

That was just the side hobby you did while working on your Mrs degree.

ersatz007's picture

While I am all for people paying back their loans, I'd feel a lot better about this if the same zeal was applied to making the banksters pay back all the money they received during the financial crisis.

If I had the choice (and obviously I don't) of my tax dollars going to a kid getting an education vs a bank CEO buying a $90,000 Oriental rug for his office........

 

ZD1's picture

"Trump's protecting his rich banker buddies against poor students."

No, he's protecting working taxpayers who would be on the hook for guaranteed student loans that students default on.

jeff montanye's picture

how exactly is that?  do taxes go up if the students don't pay?  not really.  do interest rates even go up?  they ought to but they haven't in a long time.

follow the money.  this law change gives more money to the debt collectors.  that's what it says.  and takes it from the debt children of the debt parents and keeps so many on the rack of debt not subject to bankruptcy, a totally modern concept by the way.  

this is the end of the credit cycle guys.  these and many, many other debts will not be paid.  get used to the idea.  it is only through a radical reform, restructuring and repudiation of the financial system that an organic recovery can begin.  wars have often birthed such cataclysms in the past.  let's hope whatever wars we see don't involve maximum weaponry.  that's why i voted for trump, at base.  let's hope he makes good on that promise.  he's not looking so good on working first and foremost for the common man lately.

beemasters's picture

Spending $156 Billions on a violent industry that keeps the world in chaos and the elite ultra rich... Good.
Spending on young generation education as a long-term investment in social/economic infrastructure... Bad.

nmewn's picture

It all depends on which genre of "elite ultra rich" one is talking about, university president base salaries range 400k to over one million dollars a year. Then we can start factoring in his/her staff, tenured professors, athletic directors etc.

You can lay a helluva lot of asphalt for a million bucks, don't you think?

"At some point you've made enough money!" - ex-president with no appreciation of irony or hypocrisy signs a sixty million dollar book deal before going on a Caribbean cruise with billionaire Richard Branson.

swmnguy's picture

Tenured professors are wildly over-estimated in these parts.  Most teaching jobs are given to adjuncts, who get no benefits and get paid around $1500 per credit hour.  So if you teach 4 @ 3-credit classes, which will take well over 40 hrs. per week for a semester, you'll make around $18,000 over those 4 momths.  Good luck paying off the loans it took for you to earn the qualifications to get that lucrative opportunity.

Tenured positions are not the norm.  And the trend is toward eliminating them altogether.

The real cost drivers are the executives, squadrons of administrators, the staff they require, the lavish accommodations, the sports palaces, and the general looting one sees everywhere financialization has taken over.

Those seeking complete corporate takeover of education always point to the teachers and professors, because they are the main voices speaking out against the creep of financialization.  And there's a solid group of Americans who hate eggheads, pointy-headed intellectuals, and anybody who tells them there's a better way to do things.  Hell, a lot of them are so god-damn dumb they won't even vaccinate their kids, and then they wonder why fucking whooping cough is endemic in the schools again.

shovelhead's picture

What part of the "Schools gets the money in full and the govt trys to collect the debt" do you not understand?

Who pays govt. debt that is not borrowed?

Unicorns?

Got The Wrong No's picture

The National Debt goes up. That's OK, right?

Chris Dakota's picture
Chris Dakota (not verified) ZD1 Mar 19, 2017 7:37 AM

No actually he is trying to stop the brainwash.

The worst people get those social justice degrees =Black Lives Matter

The schools are the problem.

My kid said to me "They don't teach you anything, they are brainwashing you."

He is paying for courses outside of college to build skills.

shovelhead's picture

They can get brainwashed on their own dime.

As far as I'm concerned, the Govt. in the loan guarantee business is the problem.

Let banks suffer for their shitty lending choices.

micksavage2010's picture

u hit it on the head of the nail shovelhead.

wtf? gov guarantees loans? how bout for my cannabis biz? very selective and the only one making money is the bank. waht, since (wince i say!) 2005? it was not possible to discharge student debt in bankruptcy? how precient of the banking industry.

kloro2006's picture

direct public financing of public education made the post-war economic boom possible. the gutting of public education is the gutting of the economy. China (and Russia I believe) still practice massive support for public education. We have given it up basically so the ultra-rich can afford the constant increase of their luxuries.

 

kloro2006's picture

direct public financing of public education made the post-war economic boom possible. the gutting of public education is the gutting of the economy. China (and Russia I believe) still practice massive support for public education. We have given it up basically so the ultra-rich can afford the constant increase of their luxuries.

 

crossroaddemon's picture

Good luck with that... the employers want to see sheepskin. 

You know that women's studies majos and other such are by far the minority of students, right? College is more vocational than it ever was. The days of getting a lib arts degree and training in your fiekd on the job are gone.

swmnguy's picture

You're correct.  Ever since the '70s, colleges have become very expensive vo-techs.  That's how the survived the end of the Baby Boom.

The corporatizers are still capitalizing on resentment from the 1960s.  The Politically Correct Social Justice Warrior bullshit is so incredibly wildly overblown it's amazing.  My son is at the University of Minnesota, and about half my family are college professors.  They wouldn't recognize the image of higher education that's tossed around here at ZH and across the right-wing web.  And ZH and the right-wing web wouldn't recognize what's really going on at college campuses.

azusgm's picture

He is deflating the college and college loan bubbles by starting with defaulted old loans. The parties are likely going to need to go to court and get their individual cases settled since bankruptcy is not an option.

Question: Didn't the bank-backed college loan program go away around 2008 or 2009? IIRC, that program had to be abandoned because there were so many scam trade schools that cropped up.

ersatz007's picture

When will he start protecting us from the banksters??   Oh yeah, that's right, he's too busy sticking his nose up Goldman Sachs' ass.  

Pure Evil's picture

Obviously kavlar has a reading comprehension problem and your pointing it out will only trigger him.

rahrog's picture

Bankers do not pay for loan defaults.

 

People who are forced to use the federal reserve note pay for ALL bail outs through the constant increase in the monetary supply.

 

This shit has been going on since the banksters (& their whores in DC) created the federal reserve; then comes Bretton Woods-IMF/World Bank, and finally global fiat currency spawned out of the shitholes of DC & NYC in 1971.

 

jeff montanye's picture

that is closer to it.  all holders of currency, not really taxpayers or even bondholders, are the funders of such as these student loan defaults.  

but again, like the pensions of the police and the soldiers, the bankers and the social security of the younger baby boomers, among others, these debts will not be paid with "real" money.  

better have your precious metals and their miners in your portfolios.

few do.

Stuck on Zero's picture

That's so misinformed. The government backstops the banks on student loans courtesy of Obama. Universities are the richest organizations to be seen in the U.S. Trump should ban any Federal money from going to universities that have more than $1 billion in their endowment funds.

y3maxx's picture

-Could this be a precursor to getting students with loans into the Armed Forces?