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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Lore's picture

Exactly. Debt forgiveness in exchange for military service, and citizenship for immigrants.  America has roughly 95 Million people on food stamps. If just 1/4 of those are of recruitment age and receptive to indoctrination, you're looking at a disposable army of around 23,750,000 "dumb, stupid animals, and instruments of foreign policy" (h/t Henry Kissinger).  The trick is to remove other opportunities and make the recruits and their families sufficiently undereducated, rudderless, drowning in debt and desperate enough that they will line up in large numbers.  First comes a market crash and deep depression; the "Uncle Sam Wants YOU" ads will follow. 

This article detail interests me:

"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." 

Wow. HOW MANY TIMES ARE PEOPLE ALLOWED TO DEFAULT? 

crossroaddemon's picture

It's super-easy to get out of a default. There are a couple of ways to do it, the easiest and quickest of which is actually burried a bit because I think they don't want you to know about it. I helped a neighbor with this recently... you just get a consolidation loan. Puts everything up to date; you can now go on IBR, get a defferment... you can even borrow more $$$ and go back to school! Also you can file a tax return again without getting it seized, and if your income is being garnished that will stop as well. It's less than 30 minutes of online paperwork to get it done.

jeff montanye's picture

thanks, that makes sense as likely the loan outstanding and the interest payments increase and show (spurious) profits on the income statements/balance sheets of the banksters

as i said, these debts will not be repaid, though perhaps will be augmented by a law stating that in addition to social security payments and bankruptcy, they are not dischargeable in death either. 

 

crossroaddemon's picture

OK, dumb question. I didn't post an opinion or a position; just factual, verifiable information. Why is that getting downvoted?

Lore's picture

One or maybe two people seem to do it religiously, targeting certain posters and certain subjects. Chalk it up as mental illness.

Pure Evil's picture

No, that is what the draft is for.

This is a feeble attempt to get the entitled snowflakes to accept responsibility for their actions.

Namely taking out loans they had no intention of ever paying back, or else why would you default?

cheka's picture

what about the loan forgivenss deal that obomba gave to students that were associated with two large for-profits?

of course both were heavily minority and heavily indebted with loans backed by we the people

Syrin's picture

Snowflakes, meet the real world.

hope_talk's picture
hope_talk (not verified) Syrin Mar 19, 2017 5:44 AM

I'm making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life. This is what I do... http://bit.ly/2jdTzrM

Escapeclaws's picture

What a relief that we don't have to look at those ugly Kleptons for eight years! Everyone should click on this link. The whole family looks great. They are obviously not losers like the Kleptons.

crossroaddemon's picture

Dude, she's older than I am. Jesus, I'm not a billionaire and I won't even fuck anything above the age of 35. Why does Trump? Pathetic.

Conax's picture

What's with her giant Ray-Bans on a dark and gloomy day?

Smokin the reefer before going on a helicopter ride again, Mel?

(Wheeee!)

Straighten up young lady.

Zero Point's picture

You enter into a stupid contract with a deadbeat who has no real hope of paying, you deserve to lose.

Vilfredo Pareto's picture

In have to wonder about some of the people I have seen take out loans.   Most of them had no realistic chance of finishing.

 

And BTW when did two years of cosmetology school start costing $40,000?

jeff montanye's picture

when you could borrow federally guaranteed money to pay for it?  just a guess.

crossroaddemon's picture

Two years of anything costs 40k. 

Koba the Dread's picture

Of course not, moron. All of America's founding fathers died deep in debt except George Washington. He avoided debt by marrying the richest woman in America.

The US Constitution has a section allowing bankruptcy: that's why discharge in bankruptcy is given in federal court. There was a reason for the bankruptcy clause. Our founding fathers were risk takers, gambling men. Bankruptcy laws were devised specifically to encourage risk taking. Win some; lose some. But if you lost it all, you didn't go to debtors' prison as in England. You declared banruptcy; all your existing assets were confiscated and you lived in shame. But you walked away from the debt.

Blame the universities. Blame the criminal loan companies and banks. They didn't even bother to check on the credit-worthiness of the borrowers. That alone is malfeasance. Giving cash to teenagers is like giving a bottle of Mad Dog to a wino. You know where its going to end up.

On the other hand, I'm more than happy to see the younger generation suffer. They're too ill-educated to prosper their way out of debt, too lazy to work their way out of debt and too stupid to scam their way out of debt. If 16 to 20 years of school didn't teach them to prosper, work and scam, what's the point of it all.

Bob Dylan said it best in the mid-sixties: Go to school for 20 years and they put you on the day shift. He also said: If you ain't got nothing, you got nothing to lose.

Zorba's idea's picture

Let me get this straight, FED prints $$$$$$$$$$$$.00 to fund cost of education.  The freshly printed paper is distributed to various lending authorities both private and public. Then, lots of creative debt monetization that would make the "closers" at the auto dealers salivate. All for the sake of a piece of parchment to go chase Part time work, which constituted 94% Obummer's 10,000,000 job creation miracle. Meanwhile we as taxpayer get bohica'd for Trilions of dollars for Wallstreeter's Fuckery and ME crusades for banks and the MIC. Its a fucking joke contextualizing this as all about snowflakes paying above market penalties and interest for hyper inflated higher education costs where the value doesn't equate to any where near what it did for the previous generation. What is really fucked up is our college system has been captured like everything else in USA! USA! USA! by the Corporate Elites, Banksters, Deep State and CONgressional whores. If that isn't toxic enough, the foul fiat that we continue to play the american dream with denigrates day by day as we pile up debts that we will never discharge. Try imagining reforming this part of the swamp with the same swamp creatures that created it. Good fucking luck

Ms No's picture

We basically have a slave mentality reality filter, due to the fact that, for hundreds of years central banking scum have controlled everything.  It makes it difficult to see around their slave system and every single business and market concept was created with the intention on maneuvering in the slave system.

Fuck the banks.  Fuck our occupation banking government.  They did all of this on purpose.  They are the reason why people are indoctrinated so bad to fall for these scams.  You can identify them every step of the way.  They didn't do it just for short term profits either, they did it to destroy us.  They have bigger plans.  People can blame the snowflakes and the Walmart employees that got huge loans for McMansions all day long but the jackals will still be laughing.  Put the fuckers in electric chairs already.

QuantumEasing's picture

+1

Lucidity from someone else who gets it.

End Crab Bucket.

Chris Dakota's picture
Chris Dakota (not verified) Ram Man Mar 19, 2017 2:12 PM

True but just like sub prime loans when Mexican gardner who didn't speak english and had income of 14K per year borrowed $800K.

Back in the day you didn't loan 50K to teenagers who have zero income and these loans are backed up by the government.

If the government didn't back up these loans none would have been made.

crossroaddemon's picture

No... you don't wanna default. They can garnish your wages and take your tax return. Income Based Repayment is where it's at. I'm on IBR myself... $0 a month for the next 25 years and Im all paid up.

tmosley's picture

You shouldn't accept slavery just because you have managed to avoid some of the more harmful features of it.

There is a principle in question here. Give them this inch, they will take a mile elsewhere.

Ballin D's picture

"Give them this inch, they will take a mile elsewhere."

 

 

barry soetero is out of the whitehouse bro

crossroaddemon's picture

How is that slavery? I pay nothing. If I did a straight default they could fuck with me in a number of ways.

CheapBastard's picture

I worked two jobs to pay off my student loans. So my suggestion is get off your duff, competre with those Starbucks refugees and AA'ers for jobs, and get to work!

It's called, "responsibility" and you better learn it 'cause there's a new sheriff in town.

Maybe those snowflakes will think before they vote for someone like Hitlery or Obama who sent all their jobs to China, Bangladesh and Mexico, or imports thousands of foreigners to take the remaing jobs here.

tmosley's picture

A slave whose master asks nothing of him remains a slave.

chunga's picture

The bankers/financiers are have sold a bill of goods and are going to win again.

Education has been financialized.

QuantumEasing's picture

This was a rare mis-step for Trump. He should have abolished the moratorium on discharging student loans through bankruptcy that was put in place by the Cunt's Rapist Husband.

Zorba's idea's picture

Nailed it! The moder phenomena brought by our finest universities/colleges...1000's of flying monkeys financializing everything they can grab hold of. 

MagicHandPuppet's picture

And what of a (tax)slave who believes himself to be free?

shovelhead's picture

Lol.

Nobody felt like a slave when they got to cruise through 4 years of party time paid by taxpayers when they didn't feel like "being slaves" and defaulting on the loans.

Nobody feels like a slave when they drive that new car off the lot...They only feel like a slave when the repo man hooks the car and drives away.

Get real.

tmosley's picture

Did you read Pinocchio? Remember the part where the kids got turned into donkeys and then got worked to death? Do you laugh when you read that? Jack off maybe?

Zero Point's picture

Even worse is that without the mechanism of bankruptcy to properly price risk, lenders lose all grip on reality and in fact become the true source of the entire problem. Stupid kids getting in over their heads because they want to "study" psychology (get laid and protest stuff while high on drugs) are just an easy target. These stupid loans are an abomination. Bankruptcy is very important to society in many ways. Why not just get rid of the concept altogether and go back to having bum squads locking debtors in prisons?

shovelhead's picture

No loan is 'stupid' if you always get paid first. Every loan is smart as fuck, in fact the more the merrier.

It's only stupid to the guy holding the bag.

azusgm's picture

May I suggest that the colleges should reconsider their building plans. The pace of enrollment may be about to lose steam.

On the other hand, I've heard that the community colleges are now lobbying against the dual credit programs for high school students.

Now would be a good time for parents to lobby to force the state colleges and universities to cease requiring the completion of financial aid application packages as part of the admission paperwork. Parents are finding out after the fact that their kids are being led into debt. A couple of my friends have paid cash all the way for their kids' educations. Student loans were never on the table. However, both of the kids had to submit the financial aid disclosures in order to enroll. This should not be happening. A superintendent of a good small charter school system told me that 18 y/o kids are enticed to sign up for financial aid without discussing the decisions with their parents.

But it is all "for the children", right?

nmewn's picture

This is actually a fair idea as long as its tied to the field of study and the performance of the professor/university/faculty in teaching it. After all, the true "beneficiary" of the loan is actually them and the institution...not the students.

I love winning ideas ;-)

johngaltfla's picture

#WINNING

Those of us who engage in business and obtain loans we do not get "special" breaks from banksters. Elizardeth Pocohantas Warren can go suck on Hillary tittage if she thinks those of us who pay taxes and work for a living think she's got our support on this issue.

Fawk the snowflakes.

Trucker Glock's picture

"Those of us who engage in business and obtain loans we do not get "special" breaks from banksters."

You can declare bankruptcy.  Sounds like a break, relative to non-bankruptable student debt.

johngaltfla's picture

Next time don't take a loan out to study fucking bullshit and get a degree in something economically viable OR do what many of us did and work through college to pay for it.

The college debt snowflakes who are begging for help can, one more time for those who majored in some bullshit:

FUCK YOU WE DON'T CARE ABOUT YOU.

Trucker Glock's picture

The article is about collection fees.  People who have defaulted on student debt are simply asking to not be raped by a collection agency, who also happens to be the loan originator.  If you read the back story on the woman cited, she was making effort to repay her debt.  The unreasonable $4,500+ collection fee on $18k debt does nothing but impede progress toward paying the original debt.

You're lumping all student loan default into a group called snowflakes.

johngaltfla's picture

Uh, if you knew the legal fees involved in doing collections you would not say this. Especially when it involves interstate lines.

You're also incorrect about the loan originator involved in its own collections. After so many months delinquent the loans are sold off via an online auction process. The credit score of the debtors and implied earnings are taken into account and those with a higher chance of recovery are sold for 90 cents on the dollar; the snowflake slugs usually in the 50-70 cent range.

The originators want nothing to do with the legal collections process after 180-270 days; it's too expensive to retain the staff of attorneys to engage in this. They sell the debt to the collection whores who then engage in actions to win; including suing the debtor.

If the student loan debtor can not handle the debtload, then perhaps they should have read the contract before they signed it. Tough shit, they can eat it.

nmewn's picture

Well they did have the option of college pre-pay and saving and working.

And I know that sounds so much harder than just signing some paperz offered to them (because it is) and I agree college kids shouldn't be given access to credit cardz or the vote because they are not (as a majority) mature enough to handle those life & death decisions these days...for some as yet, undefined reason ;-)

OverTheHedge's picture

Living in the real world, AND saving $200,000 for future college education so as to earn EVEN more money, sounds slightly unbelievable, especially if you need a degree to be a minimum wage barista.

Perhaps the overinflated college costs have something to do with this? And how did they manage to become so overinflated? By lending $200,000 to anyone still breathing, at no risk to the lender. The good news is that, when the bubble pops, all those overpaid university bureaucrats will be VERY surplus to requirements.

nmewn's picture

Well, everyones mileage will vary but...MrsN and I did the Florida Pre-Pay route long ago, before even the last diapers hit the can. All thats left is the ability to pay living expenses and whatever "hidden fees" the quasi-bureaucratic, overpaid, Mercedes/BMW driving denizens of academe have dreamt up since 1999 and there is no intention (and never was) of taking out a student loan for living expenses. 

Seems to me academia wants it both ways, they like the idea of themselves being presented as...nothing short of altruistic human beings wholly devoted to the betterment of future generations and of society & culture in general. 

But they want to get rich in the process ;-)

barroter's picture

just beg, cry and scream for TARP..like the banks did.

 

shovelhead's picture

Business loans are based on risk and tangible assets the lender can recover.

A students collection of co-eds panties is not consided a valuable asset in case of default.

QuantumEasing's picture

Your tax dollars are not used in the way you assume they are. The *REVENUES* collected are profits that pay dividends to the Federal Reserve Board of Governors.

You are not a Federal Official, either. So why are you claiming the Federally privileged status of taxpayer? Stop whining and either grow a pair, or suck it up and pay the ignorance fee.

Student loans need to be treated exactly the same as business loans. No special breaks for the banksters.