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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shovelhead's picture

You seem to be hung up on the non-dischargable part. Fair enough. No Govt. guarantees and bank and students contract alone.

Student lending drops to 5-< 10% of former levels. Everything is hunky dory.

That's the way it's supposed to work. No debt slavery...and banks and students live with the risk.

Non discharge was a "fix" to "fix" the error of Govt. subsidy which caused tuition to soar in the first place.

tmosley's picture

Yes, I am very attached to equal protection under the law. Government intervention in the markets is not a justification for slavery.

QuantumEasing's picture

The presence of fraud vitiates a contract ab inito.

Delving Eye's picture

Agree. There are so many scams that bamboozle people who seem incapable of thinking for themselves -- such as:

"Housing will always go up, so buy as much house as you can afford!"

"Your pension is SAFE with us!"

and

"Go to the best (read: most expensive) 4-year college you can. You deserve it! Parents, take note!! Your child's future hangs in the balance!!!"

Education is one of the biggest scams going in America (right after Congress), from the intransigent NEA and its union perks to the exorbitant cost of higher education. Trade schools and specialty associate's degrees could provide most students with the skills to be well employed, instead of debtors for life. They need to stop being sheeple -- a tall order.

Bigly's picture

Lots of valid points here.  This is one to be addressed though and he did.  Shazaaam!

Next:  perp walk ponzi scheme bankers. My fear is Trump is too Squidious (my new word)

Jared needs a demotion tout suite

BabaLooey's picture

ONE in the "I'm totally on board with" - excellent.

Trucker Glock's picture

Over $4,500 in collection costs?  Fucking scam, worse than usury. 

Bigly's picture

I detest collections people. I met one over of said company.  Drove a new ferrari and had a 60k rolex.  And probably the smallest of dicks because of his overcompensation of flashy shit...

Collections is a racket like so much other stuff.  We need some reforms here too.

Trucker Glock's picture

These fucks, USA Funds, are both the loan originator and collection agency.  So, they make shit loads of easy money on both ends.  Scum.

Funny that ZHers think only "snowflakes" default on debt and get off on other people's misery.

BTW, this reversal of policy does zero to help taxpayers.  Probably does more damage, while enriching a supposed non-profit.

Chris Dakota's picture
Chris Dakota (not verified) Trucker Glock Mar 18, 2017 9:47 PM

Those loans never should have been made. They will crash the economy because they will never be able to buy a home or even a car.

ZD1's picture

Collection fees are a good incentive NOT to default on a loan that taxpayers have guaranteed.

Don't take out a loan in the first place.

turnball the banker's picture
turnball the banker (not verified) Mar 18, 2017 7:55 PM

Bankers gotta have that money

HRH Feant's picture
HRH Feant (not verified) Mar 18, 2017 7:56 PM

Good. If you didn't want to pay back your student loan you shouldn't have signed on the dotted line.

Reality is a bitch. It looks like a lot of snowflakes were bitchslapped. What took so long?

PoasterToaster's picture
PoasterToaster (not verified) Mar 18, 2017 7:57 PM

Will they be rolling back the anti-bankruptcy protections for private student loans?  How about letting people discharge the government student loan debt while we're at it?

Or are the Goldman Sachs financialists getting their sway on in the Trump administration? 

There is a lot of student debt being harvested for private financial interests.  It needs to be dischargeable in bankruptcy the same as any other debt. 

There should be no special protection for universities or banks.

artichoke's picture

It's only right, but that would require a bill from Congress.

cowdiddly's picture

Then the rates would be astronomical being unsecured and to most likely minimal or no credit borrowers of questionable skills, assets. employment history, work ethic and such. Or to put it mildly, the Sub in Subprime

If you like your 23% student loans, have at em.

swmnguy's picture

They don't have to unsecured loans.  Many students have their parents co-sign as it is.  Yes, interest rates would go up, they'd have to do some actual underwriting, and there might be some pressure applied to colleges to require more from incoming freshmen than the ability to fog a mirror.  A 4-year degree might regain some relevance.  Businesses might stop requiring a 4-year degree for entry-level jobs.  A few colleges might have to close down.  All in all, not much of a downside.

whatamaroon's picture

Both my daughters wanted me to co-sign for 'beauty college' loans, I refused they learnt a costly lesson.

Maxter's picture

Then people would stop taking those loan, which would make college lower the cost of their diploma since nobody will be able to afford it. Win Win

swmnguy's picture

Nope, this is just The Squid locking everybody into the barn before torching it.  They no longer even care if they get paid back; they just want the claims.  Same dynamic going on in the fracking industry; it can't make enough money to pay off the debt, and soon The Squid will own all of that, too.  Student Loan debt is now well more than total credit card debt.  The Squid can't let anybody out of that.

Right now they're cranking up the Wurlitzer, playing the old chestnut about lazy students living high on the hog off taxpayer money, doing all the hippie things that infuriate people still stuck in the '60s and '70s.  The Squid reserves its true contempt for the intelligence of those who blindly cheerlead for them and boo on cue the strawmen they put up.  Even before the housing finance bubble collapsed, The Squid was blaming it all on black people and the Community Reinvestment Act of 1977.  And behind closed doors, in finance sector corporate meetings, they were laughing out loud about that one.  I know; I was in a few of those meetings and heard them laugh that anyone would believe that smear.

They're playing a dangerous game.  A fiat scheme requires everyone to participate, like other top-down efforts to bail out an already-dead industry (cough-ObamaCare-cough).  What you can't do is let anyone opt out.  But The Squid's gaining the control to write their own rules doesn't put money in the pockets of the debtors.  At a certain point, if they simply can't pay, they won't.  And then it's The Squid's problem, as they won't have any assets to seize and when .gov goes after the parent's retirement and Social Security on a large scale, that'll get nasty.

No doubt The Squid already has their bailout all lined up for this bubble's collapse.  They didn't buy that influence and control for no reason.

QuantumEasing's picture

Shhhh, you're being too logical. Can't have that.

The Bankster fanboys are high-fiving each other. They'll get tuckered out soon enough.

shovelhead's picture

Can I borrow some of your Kumbaya money?

QuantumEasing's picture

Sorry.

I'm a Dapper Dan man. I don't do Fop.

No.Fifth.Turning's picture

Once the machines take over, we can live in blue pill happiness, free food and a place to sleep.

tmosley's picture

Imagine how awesome the Matrix would have been if the machines had been honest from the start, and everyone was allowed to have superpowers.

TradingTroll's picture

It's deeper than that though. Edgar Cayce called those who followed nature's divine laws "The Sons of the God of One".

It's consuming resources for the sake of capitalism. It's pretending war is the solution to overcapacity. It's glorifying lying and cheating (thanks Hollywood) to the detriment of mankind.

When the 2nd law of thermodynamics comes home to roost, and attrition of systems begins in earnest, I think you want to be close to nature not machines.

shovelhead's picture

Is 'watch the donut and not the hole' one of those divine laws?

Where can I get the Official Version? I don't think that Hebrew version is very popular around here.

Cheyenne01's picture

Another trilliion $$$ plus going on the taxpayer's backs? How insane these socialists are. Throw it away until there's none left, then watch 'em whine and cry.

crossroaddemon's picture

Doesn't matter so long as IBR is in place. Hell, MY stuff is on IBR and damned if I'm apologizing for that.

pparalegal's picture

Snowflakes who can't add or subtract without an 'app for that' won't, but they should be maddest at Hillary, Obama and the progressive left gang.

They sold the debt like manna from heaven to willing dolts, made it un-dischargable in bankruptcy, then when the bomb exploded tried to stuff it down taxpayers throats. A communist wealth transfer plan Mao would be proud to think of. Good for Trump. First president with balls since Reagan or maybe even Eisenhower.

shovelhead's picture

I don't think Mao was that stupid. Crazy as hell, but not stupid.

Nona Yobiznes's picture

Bring down the cost of education, especially when it comes to practically pointless areas of study like Art History. It's not that fields like this are unimportant, but in a purely utilitarian society they will get you nowhere, unfortunately. The price of programs should be proportional to the economic prospects after graduation. Only then will students be able to pay off their debts.

I know people here are laughing at the expense of "snowflakes", but there are a lot of decent people who get stiffed by universities. They are lured in with promises of high paying jobs, pay the exorbitant costs, then enter a terrible job market and are completely unable to repay their loans. It's a well-established predatory practice and it needs to be addressed. Same with healthcare. The prices are so high, people get stiffed paying for insurance. Somewhere along the line, someone is lining their pockets with a hell of a lot of unjustified money at the expense of struggling individuals. 

cowdiddly's picture

Nobody "lured" them into college or promised them high paying jobs or anything for that matter. They managed to convince themselves that it was doable and bought into a hype that they themselves in part created..

tmosley's picture

I was told that I would be able to get a job paying $50K straight out of college. This was a lie. I managed to get there several years later. Most of the people who graduated with me never got jobs in their field. Talking hard sciences here.

So stop talking out of your ass and understand that this is all a symptom of the decline of this country. You are not a special snowflake who succeeded because you are so great. If you were coming out of school now, you would be just like them.

cowdiddly's picture

ANd you knew the terms of the loans... But did it anyway. And now you want to cry foul for something YOU did to yourself. Now grow up, grow a pair and get busy righting the problem and quit blaming everyone else for your problems and actions

Suck it up snoflake and get to paying on it. There are TONS of jobs that your are to precious to do I suppose because you want to sit in an air conditioner and point fingers.

That being a dipshit and digging a hole for yourself does'nt end just because someone handed you a mortar board.You can do it at any point in life you like. It doesn't end.

And I am sending one to school now with money I WORKED MY ASS OFF doing jobs that you are probably to good to do, did without AND SAVED FOR for years, so fuck right off.

 

tmosley's picture

You got mega cucked and now you are going back for seconds.

Jesus, how can anyone be so stupid? You deserve your slavery.

cowdiddly's picture

Look T I always liked you. 50- 60K is not insurmountable. Do what you got to do and put it behind you. Its a mean old dog eat dog world and nobody said it was fair.

Millions of people have before you and thats just the way it is. I've had my nuts in a vice before with those sorry assed banks in amounts that would stagger in comparison. It part of the learning curve.

Tough times don't last but TOUGH PEOPLE DO.

and as far as being a slave, well I have worked like a negro slave most of my life so I guess I was never under any other assumptions.

 

 

tmosley's picture

Hahaha, it's long, LONG behind me. I'm concerned for the young people. All you boomers keep shitting on them like you are somhow better, but you would be exactly the same given the same circumstances. You show no empathy.

>I've had my nuts in a vice before with those sorry assed banks

Yes, and you had the option of bankruptcy. Something that has been stolen from this generation. First they were victims of massive fraud, and now old people want to enslave them because they fell for it. It makes me sick. Literally sick.

shovelhead's picture

What's stopping those kids from going to the bank and asking for a dischargable loan? The laughter they would hear?

chubbar's picture

People in every stage of their life are responsible for doing due diligence on whatever decision they are making. Being told they will make money out of college? By whom? Did they get it in writing?

Anyone going to college needs to be aware of trends and what is changing. Here is a for instance in trends barring a world war or depression that wipes us all out. If you are a prospective college student then you need to decide where to put your efforts in education.

"In 1998, Kodak had 170,000 employees and sold 85% of all photo paper worldwide.

Within just a few years, their business model disappeared and they went bankrupt.


What happened to Kodak will happen in a lot of industries in the next 5-10 years and, most people won't see it coming.
Did you think in 1998 that 3 years later you would never take pictures on film again?

 

Yet digital cameras were invented in 1975. The first ones only had 10,000 pixels, but followed Moore 's law. So as with all exponential technologies, it was a disappointment for a time, before it became way superior and became mainstream in only a few short years. It will now happen again (but much faster) with Artificial Intelligence, health, autonomous and electric cars, education, 3D printing, agriculture and jobs.

 

Welcome to the 4th Industrial Revolution. Welcome to the Exponential Age.

 

2.  Software will disrupt most traditional industries in the next 5-10 years.

 

3.  Uber is just a software tool, they don't own any cars, and are now the biggest taxi company in the world.

 

4.  Airbnb is now the biggest hotel company in the world, although they don't own any properties.

 

5.  Artificial Intelligence: Computers become exponentially better in understanding the world This year, a computer beat the best Go-player in the world, 10 years earlier than expected.

 

6.  In the US , young lawyers already don't get jobs. Because of IBM's Watson, you can get legal advice (so far for more or less basic stuff) within seconds, with 90% accuracy compared with 70% accuracy when done by humans.

 

So if you study law, stop immediately. There will be 90% less lawyers in the future, only omniscient specialists will remain.

 

6A.  Watson already helps nurses diagnosing cancer, its 4 times more accurate than human nurses.

 

7.  Facebook now has a pattern recognition software that can recognize faces better than humans. In 2030, computers will become more intelligent than humans.

( NEVER!/Albert)

 

8.  Autonomous cars : In 2018 the first self driving cars will appear for the public. Around 2020, the complete industry will start to be disrupted. You don't want to own a car anymore. You will call a car with your phone, it will show up at your location and drive you to your destination. You will not need to park it, you only pay for the driven distance and can be productive while driving.

 

The very young children of today will never get a driver's licence and will never own a car.

 

8A.  It will change the cities, because we will need 90-95% less cars for that.   We can transform former parking spaces into parks.

1.2 million people die each year in car accidents worldwide. We now have one accident every 60,000 mi (100,000 km), with autonomous driving that will drop to 1 accident in 6 million mi (10 million km).  That will save a million lives world wide each year.

 

8B.  Most car companies will doubtless become bankrupt. Traditional car companies try the evolutionary approach and just build a better car, while tech companies (Tesla, Apple, Google) will do the revolutionary approach and build a computer on wheels.

 

8C.  Many engineers from Volkswagen and Audi; are completely terrified of Tesla.

 

9.  Insurance companies will have massive trouble because, without accidents, the insurance will become 100x cheaper. Their car insurance business model will disappear.

 

10.  Real estate will change. Because if you can work while you commute, people will move further away to live in a more beautiful neighbourhood.

 

11.  Electric cars will become mainstream about 2020.  Cities will be less noisy because all new cars will run on electricity.

 

12.  Electricity will become incredibly cheap and clean: Solar production has been on an exponential curve for 30 years, but you can now see the burgeoning impact.

 

13.  Last year, more solar energy was installed worldwide than fossil. Energy companies are desperately trying to limit access to the grid to prevent competition from home solar installations, but that simply cannot continue - technology will take care of that strategy.

 

14.  With cheap electricity comes cheap and abundant water. Desalination of salt water now only needs 2kWh per cubic meter (@ 0.25 cents). We don't have scarce water in most places, we only have scarce drinking water. Imagine what will be possible if anyone can have as much clean water as he wants, for nearly no cost.

 

15.  Health: The Tricorder X price will be announced this year. There are companies who will build a medical device (called the "Tricorder" from Star Trek) that works with your phone, which takes your retina scan, your blood sample and you breath into it.

 

16.  It then analyses 54 bio-markers that will identify nearly any disease.  It will be cheap, so in a few years everyone on this planet will have access to world class medical analysis, nearly for free.  Goodbye, self-serving medical practitioners and establishments.

 

17.  3D printing: The price of the cheapest 3D printer came down from $18,000 to $400 within 10 years. In the same time, it became 100 times faster. All major shoe companies have already started 3D printing shoes.

 

18.  Some spare airplane parts are already 3D printed in remote airports. The space station now has a printer that eliminates the need for the large amount of spare parts they used to have in the past.

 

19.  At the end of this year, new smart phones will have 3D scanning possibilities. You can then 3D scan your feet and print your perfect shoe at home.

 

19A.  In China, they already 3D printed and built a complete 6-storey office building. By 2027, 10% of everything that's being produced will be 3D printed.

 

20.Business opportunities: If you think of a niche you want to go in, first ask yourself: "In the future, do I think we will have that?" and if the answer is yes, how can you make that happen sooner?

 

20A.  If it doesn't work with your phone, forget the idea.  Any idea designed for success in the 20th century is doomed to failure in the 21st century.

 

20B.  Work : 70-80% of jobs will disappear in the next 20 years. There will be a lot of new jobs, but it is not clear if there will be enough new jobs in such a short time. This will require a rethink on wealth distribution.

 

21.  Agriculture : There will be a $100 agricultural robot in the future.  Farmers in 3rd world countries can then become managers of their field instead of working all day on their fields.

 

22.  Aeroponics will need much less water. The first Petri dish produced veal, is now available and will be cheaper than cow produced veal in 2018. Right now, 30% of all agricultural surfaces is used for cows.  Imagine if we don't need that space anymore.

 

23.  There are several startups who will bring insect protein to the market shortly. It contains more protein than meat. It will be labeled as "alternative protein source" (because most people still reject the idea of eating insects).

 

24.  There is an app called "moodies" which can already tell in which mood you’re in.  By 2020 there will be apps that can tell by your facial expressions, if you are lying. Imagine a political debate where it's being displayed when they’re telling the truth and when they’re not - it will ultimately compel all politicians to be truthful (a truly unique & novel occurrence).

 

25.

# BY 2020 (or sooner - some might suggest this is happening now) WHAT A UNIVERSITY STUDENT LEARNS IN THE FIRST YEAR OF A THREE YEAR DEGREE - WILL BE IRRELEVANT AND REDUNDANT BY THE TIME THE THIRD YEAR IS COMPLETED!

 

TeethVillage88s's picture

I'm impressed. I like Futurism.

"8B. Most car companies will doubtless become bankrupt."

But... downsizing is part of manufacturing and business.

"8C. Many engineers from Volkswagen and Audi; are completely terrified of Tesla."

But I see Asians, Filipinos too, as being very good at copying technology. Maybe there is an Espionage Industry already that does this (Bankers). France spies on US. Globalism tries to put rules on property rights. But Samsung & Apple still fight.

shovelhead's picture

And so do you.

Enjoy it. You earned it. No freebies for you.

artichoke's picture

Art history is for the daughters of wealthy families who will get them jobs as museum curators until they have their babies, and maybe again after too.  I took such a course in grad school just for variety, after I'd passed all the exams.

Black studies was originally created because many black students, newly admitted to university but unable academically, needed a degree to help them avoid flunking out.  But now we've lost sight of it and it's become a "thing", along with women's studies etc. etc.  These degrees are useless, people!  If you have a scholarship and it's all you can pass, go ahead.  (I'd roll back such scholarships btw ...)  But it's crazy to go into debt for such a thing.

dark fiber's picture

Yeah, that gender studies degree... It will suck big time down the line.

Excellent move to hit the left where it really hurts and counts.

chubbar's picture

There are some here arguing that someone taking gender studies or someother stupid fucking degree shouldn't be accountable for the loans they took out to get that degree when any reasonable person should have known it was uselss to begin with. That's the crux of the issue with me anyway.