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.



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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thisguyoverhere's picture

It seems pretty clear that Trump has not been in charge for some time.  Trump this and Trump that, look they will allow him to do the insignificant.  He has family, he's controllable.

Itsarap's picture

Thanks,Tyler for pointing out that only snowflakes are caught up in the Zionist debt schemes!LOL!!!!!!

AlbertthePudding's picture

Clearly Trump doesnt see his future as President tied to the student vote.

They need to reset education to what is good for the folks rather than the educationists and the educational capitalists both of whom are more dependent on the government teet than the students they have enslaved.

Remember, when the washing machine breaks down you can't ring China! (Shop Class, Soulcraft)

Kefeer's picture

Wait till the teachers pension funds begin to go "belly up"; there are going to be a lot of MadCows to deal with and Trump can blame the Russians. I recognize these are promises that were made on political basis, under funded from the beginning just as the 220 trillion promised by politicians many years ago. The pension funds are now "restructuring" and changing the rules to invest into the stock market as they try to survive (AKA "kick the lit bomb down the road") by running over higher cliffs.

crossroaddemon's picture

A washing machine is such a simple device that if you are paying to have it fixed you clearly have more money than brains anyway. 

Kefeer's picture

If you want to solve the issue; make the universities give a 100% money back guarantee if they cannot place a diploma recipient into a position.  This will quickly do two things - get rid of useless degrees and set higher standards for the degrees that are needed.  An added benefit is there will be fewer universities to suck off the taxpayer tit.

PoasterToaster's picture
PoasterToaster (not verified) Mar 19, 2017 6:18 PM

Maybe start by getting rid of these "guarantee agencies".

Tom Green Swedish's picture

Good. I'm not paying for this shit. You bought it you pay for it. NO MORE HANDOUTS.

StanleyTheManly's picture

Unfortunately, that's not what's been said here. Looks to me like the taxpayer is still going to be holding the bag if they don't pay.

headless blogger's picture

Exactly. And it will be more now that the Banksters can add more fees onto the already un-payable loan.

SwmngwShrks's picture

Those who are quick to point out the red herring of spring break trips forget that college tuition rises while the value has crashed. Where once a student received smaller class sizes, now students must attend online classes in order for the college to maximize the amount of kids they can teach. The text book prices have gone through the roof, with bs additions and new versions amended just so the book cannot be sold back or traded to another student. Programs to do the teaching for the teachers, such as Pearson, are now the norm, requiring the student to pay addtional monies, not so they can get hands on learning such as in a lab, but so the college can do less original work, and homogenize the educational experience. The real kicker is the INFORMATION IS FREE!

With the advent of the internet, cutting edge information is available free online. The entire thing is a farce. Yet, due to the dilution of the value of a degree, one must have a degree to have any chance in the job market. But due to how much a student must take in loans, with the jobs available going down in value in order for the student to pay and play, which was once a possibility, in the "new normal" is next to nil.

Students graduate (possibly) from school with a lower credit score due to high non-revolving loans, and then must pay higher prices for anything from car insurance to credit cards (meh) to having the ability to own a home. What once was common for college grads to own homes is but a dream:

"If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their Fathers conquered.... I believe that banking institutions are more dangerous to our liberties than standing armies.... The issuing power should be taken from the banks and restored to the people, to whom it properly belongs." Thomas Jefferson

At the end of times, we always go back to the beginning.

wobblie's picture

The existence of the humanities, as useless as they might be, are also a sign of a health and wealthy soiciety.

But the ruling class is afraid of them anyway, because it means having a broader view than reducing everything to capitalist economic ideology.

Putting this on students and endenturing them for life is ridiculous and does not bode well for "economic growth". It's a stupid system and you're blaming the tools/victims instead of your masters.

Is anybody aware that the banks, under Conservatives and Liberals, sucked billions in bailouts after fleecing the public of billions more. Israel and ISSIL get 10s of billions a year and you want to enslave Americans. Nice. Targeting clueless powerless student is cheap and easy. Take on your masters.

The ruling class wants idiots, hence:


Sheople's picture

They should go after the Thieves at the Educational Institutions themselves for Bilking Students for Worthless Educations while they Enrich Themselves on the backs of the Students!

CLAWBACK all unreasonable salaries and perks enjoyed by the 'Administrative Staffs' of these Institutions of HIGHER THEFT ... and put em behind bars for a considerable period of time.

It didn't used to be this way ... and there's No Good Reason why it should be this way now (the cost of Education). Just another money making scam that has now exceeded $Trillion. The Lenders (read: BANKSTERS) ... are Culpable too!

Why isn't JOHN CORZINE behind BARS??

HenryHall's picture

Makes sense.

If people owe you big money then make sure that they are not going to be in a position to repay you.

That way you can seize their assets, daughters, lives. With luck you can force them to emigrate!

Charvo's picture

Snowflakes up to their eyeballs in student loan debt should be protesting high university administrator salaries and luxuries that were nonexistent decades ago when the quality of the education was still the same.  Getting a new stadium or new rec center and having to pay student service fees to pay for that does not do damn thing for the quality of the education, but it definitely raises the tuition bill.

Lostinfortwalton's picture

Only about 1 in 5  of the big time football and basketball programs make money for their school. The rest lose bigley, and the students are often charged a separate 'athletic fee' that goes into absorbing some of the losses.

Swamidon's picture

Kids keep whinning about not being able to "discharge the debt in Bankrupcy" sound as if there was some point in the past when that was possible, which there wasn't.  Everybody has always had to pay off student loan debt, and nobody forced anybody to take big loans for worthless degrees either.  "Stupid is as stupid does."  But loan debt isn't what's holding them down, it's just the excuse.

DarthVaderMentor's picture

Burn it down, Donald! Burn it all down! Burn, Baby Burn!


Make a whole generation of Ivy League useless snowflakes deadbeats.......

headless blogger's picture

They are the biggest generation, population wise (probably size too), now, so it would only bring the rest of us down with them.

allthegoodnamesaretaken's picture

So the guys with the money finance the college people knowing that if the college people don't pay it back the government will make the working, for low wages, people, pay it all back with high interest of course, insuring the big money suit's make a big return on "their investment."  The College people know all this too, so they party and talk about writing their first book or starting a practice in the psychiatric business.  So, a politician who might want to close this circle jerk down is really the good guy and not the jerk the MSM tries to make them out to be.  We all need to understand this.  Thank you, ZeroHedge for clearing that up for up.