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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foodstampbarry's picture

Fuck em, all Obarry and Hilltard voters anyhow.

lolmao500's picture

DC is controlled by banksters. Otherwise the student loans scam would go away real fast. Allow students to default on their student loans. College costs would go down REAL FUCKING FAST overnight.

hotrod's picture

There were a lot of people given mortgages that should have never received them.  Predatory lending.

There are also a lot of 18 year old kids that are naive as hell and had no more idea of reality than their next 6 pack and were strapped with 60,000 plus loans sold to them under the guise of FAILURE if you dont attend college.  There has been ALOT of predatory lending done to naive kids when most think they will graduate with a 6 figure job and have no problem paying it off.  MANY DONT KNOW ABOUT THE ABUSE OF DEBT AT 18 YET THE COLLEGES ARE MORE THAN WILLING TO HAND THEM OUT.

I am not saying these kids should be let off the hook but I assure you at 18  I would have HAD NO IDEA WHAT I WAS GETTING INTO.

SilverRoofer's picture

Speak for your self as I was 18 once and knew I couldn't afford college

 

tmosley's picture

Suspect you are old enough that you didn't have a social obligation to go to college, nor did you have easy access to unlimited student loans.

It's like someone laughing at someone stepping on a landmine because he walked through the same field decades earlier, before the mines were placed. Sickening and stupid.

Bigly's picture

That's what parents are for

Blazing in BC's picture

The smart kid is the landlord to all the "sheeples"

PN7's picture

A circuit court of Appeals asked the Obama Administration for guidance?  How many times they ask the Trump Administration for guidance?  Seems they could use some guidance on the refugee situation.

drexlraw's picture

refugee? don't you mean ILLEGAL aliens? Sweden has a refugee situation...

Riquin's picture

When I studied for my university degree I paid it all by myself. Working at night, working weekends and now a days I am very proud of it.

I remember that when my daugther went to the univesity to get her degrees I asked her If she wanted financiat help from me and she told me NO that if I was able to do it she was going to be able to do it by herself too. AND SHE DID !!! Now a Days she is also very  proud of it !!!

crossroaddemon's picture

Go online and check out tuition. NOBODY is working their way through college anymore; it's totally unrealistic. You're either getting help from your parents or borrowing money.

artichoke's picture

2 years community college, finish at in-state public school, it's not too bad.

One thing Obama did that made sense (about the only thing) was to emphasize community college.  A lot of kids are too young to go away to school at 17 or 18 and they don't need to be taught by research faculty yet.  They need 14 years of fundamentals these days not 12.

Riquin's picture

Comm. colleges are very good and you can get a job real quick after!!!

Jein's picture

Way more sensible route for sure but still a minimum 35-40k price tag start to finish on tuition/books/materials. 

Peterman333's picture

Comm colleges are $35 grand today? Holy Schnikes, that's downright insane. People need skills today not degrees IMO. Do trade schools still exist? I guess these are the jobs "american's dont want to do" as the liberals always say.

crossroaddemon's picture

Trade schools and community colleges are usually in the same building these days, and yes costs are the same. You're gonna take on 40k debt to become a fucking $15/hr auto mechanic.

shovelhead's picture

Nope.

Accredited Sonography Course at local CC. 3 Semester program, total $11K (with books) with 100% placement. Requires general AA. degree. or college level algebra, physics, comm. (English) and med. terminology.

45K to 85k annual earnings after a little over a year of school isn't too bad. Add more accreditation courses for more money. MRI guys are popping 100K + in N. California.

No heavy lifting. Lube 'em and tube 'em. My poor kid will never know the pleasure of watching those snug white nurses uniforms of yesteryear. Now it's all baggy scrubs.

This school doesn't do Fed. loans. Grants, scholarships and cash only.

Riquin's picture

 We; Me, my wife and daughter three of us both did not  get any loan private or governmen!!!We worked, worked and WORKED and studied, studied and studied long hours at night  after work and we did it !!!

All masters degrees!!!

 

crossroaddemon's picture

When did you do it? Again,look at modern tuition. If you're working some hourly wage job the tuition is going to eat literally everything you make... WTF do you live on?

Also I would question what you took. I've got degrees in CIS and music. These are two degree fields that back when I went through had a better than 50% failure rate; you didnt do well unless you basically put your entire being into them. You worked, or you got an A average. You didn't do both.

Riquin's picture

You do it by working on jobs related to what you are studying. In my case high tech so  I got jobs high tech related,  my first job was a bank that wanted me to developed a system to track specific custumer related behaviour to make specialized offers to those customers. Got 25,000 dollar cash for the system. my wife discovered that she really like the stock market and she got be very very good investing our savings. My daugher likes math so got jobs math related that paid very well.

crossroaddemon's picture

That doesn't always work. For instance I have a 4 year CIS (computer programming) degree... nobody fucking hires programmers who havent finished school; not even back then. If you're working, you're working at Wal Mart. Not to mention the insane amount of time invested in a degree like that. A music degree (which I also have) was the same in those days. I remember walking into my freshman aural skills class and the professor telling us that if you're going to pass this class you're going to spend a minimum of 1 hour a day seven days a week practicing for it... and that's to get a C. This is just one class. Some degrees are harder than others.

And once again you're not looking at modern costs. A 2 year degree at the local community mill is gonna set you back an easy 35k. Who the fuck is making enough scratch pre-graduation to pay that and have money to live on?

Riquin's picture

We did not have  problems getting jobs in the same field that we were studying. I did a lot of consulting  work, my wife started investing our savings she is good. My daughter also did teaching and consulting work.

Blazing in BC's picture

Going to college (for the sake of going) is like going to the casino with your new credit card

Jein's picture

Gramps, back in your day you could afford the tuition working a part time minimum wage job. Colleges got greedy and tuitions exploded, far exceeding pace of inflation. Taking uncle sam's cut into account, you'd have to make 40k a year minimum while going to school to make ends meet without borrowing. That's about the median yearly income in america. What unskilled 18/19yo is making that much? They're going to school to learn something useful (ideally) to get a 40k/yr wage. Doesn't add up pops. 

Peterman333's picture

That's true, college costs today are INSANE compared to the 90's for example. To me it's a huge scam, unless you're coming out a doctor or (less valuable these days) a lawyer you have no business even being 100K in debt and many of these kids I read about are.

CJgipper's picture

Only fools go to law school now.  There's no money in it.

Krungle's picture

So we're never going to blame the banks for this? It's perfectly ok for them to loan out money without any regard to anyone's ability to pay it back while convincing taxpayers that they have to cover losses while not getting any of the profit and making this pretty much the only class of loan that is not dischargeable in bankruptcy? Ok, seems about right. 

Was there not an article on here earlier today called Banks are Evil? All the bad behavior and moral hazard stems from their lack of responsibility and externalizing costs onto taxpayers. 

artichoke's picture

Trump's idea, expressed in a speech during the primary season, is to give them skin in the game and the power to underwrite these loans or not.

That's what it will take to bring sanity to this, so that engineering students in good standing get loans and Grievance Studies students don't.

hotrod's picture

MOST ADULTS CANNOT HANDLE CREDIT PRUDENTLY,  Do you think college age kids can? I call out the lenders and colleges on this mess also as THEY received all the money and put the burden on the kids.  Not to say some kids dont game the system but I assure you MANY think this is just the way you got to college.  Take on a shit load of debt.

Isnt it funny that Student Loan devt is recognized as one our our Federal Governments main assets.

artichoke's picture

I am waiting for her to roll back the more famous Dear Colleague letters, the ones that misused Title IX to create star chamber courts where any boy can be expelled when any girl says he sexually abused her.

Altesh's picture

Student loans will be a ball and chain for the entire population. If young people can't afford to start a family, get a place of their own or a job - what will happen? Gloating over the misfortune of young people is just shooting yourself in the foot. People didn't seem to mind all that much that they ran up 20 trillions of US dollar in debt. This is a debt left for the next generation to pay while current generations spends it all. 

Add that up with young naive kids getting suckered into getting an education by both parents and lenders. 

cowdiddly's picture

Won't affect me one iota. Nobody suckered anyone, they did it willingly.

Are people THIS STUPID supposed to be the leaders and managers of tomorrow" FUCK THAT

Altesh's picture

I'm sure you weren't naive and stupid like every other 18 year old out there. You were probably born into a suit and instantly had the skills to be a leader and manager. 

You will be effected, maybe not directly, but in indirect ways. Society is a cohesion of individuals and big societal changes does effect everyone taking part of society. 

cowdiddly's picture

No smart ass, I quit college after 2yr for a year doing back breaking work pouring fucking concrete and building bridges in 110 degree heat until I had the money to come back and finish CASH. ANd, I damn sure don't owe your in debt lazy ass a penny for your springbreak trips and new cars.

look pal I could go down to these damn stinkin banks and dig myself a 2-3 million dollar hole tomorrow or max margin every investment I have.

But I don't do it. It's called the ability to RATIONALIZE

Altesh's picture

I doubt you are from my country so there is not a chance you'd ever have to pay my student debts. Most students I met during my studies were working either one or more jobs besides studying, people who werent working on the side were considered lazy. The university fees in the US seem to be too high to work ones way through college. 

Do young people owe the old people anything then? I mean, the young got a national debt written in their name without consent to pay for all entitlements of older people. Why should young people have to pay both the unfunded pension plans, medicare/medicaid while also paying off their student debts. 

 

cowdiddly's picture

No its crazy high but many people convince themselves they CAN afford it and won't do actual work and save it.

AND your absolutely right. You should not be saddled with any of this other bullshit either for the older generations.

It's the gov't trying to mandate everything and unable to do anything but theft.

adampeart's picture

If you're naive and stupid and can't grasp the concept of how loans work and you're defined as an adult maybe that's a good sign that going to college isn't for you.

Altesh's picture

It's possible to be intelligent and stupid at the same time. 

If one is promised a rosy future by getting an education and being told by everyone one trusts, that the student debt is risk free investment. Is it so strange people sign up for student loans without doing a deeper analysis of cost/benefit? 

NoBillsOfCredit's picture

The FRNs are fraudulent. The fraud viciates all contracts. Does not everyone know that?

 

OKUSA's picture

Bingo. The grads have zero job prospects. This almost guarantees pension collapse, SS collapse, real estate collapse, etc etc. The whole student loan/university system is a scam unless you are going to be a doctor or something along those lines. A community college can provide 95% of the course work that any university can. The loans are just paying for tenured professors and the school's football team.

mosfet's picture

Good first step but let students default on the loans and get govment out of it asap.  Turmp's the king of default so let it rain unpaid debt.

CJgipper's picture

Sure.  Just give me the 60k back that I finished paying this year, and we'll just call the whole thing off.

moorewasthebestbond's picture

Bitchslap the snowflakes with BANKRUPTCY.

 

Screw the lenders too!

 

It's positively outrageous that student loan debt is not dischargeable through bankruptcy.

SilverRoofer's picture

If they allowed bankruptcy for student loans

Then their degree should be forfeited as well they shouldn't be able to go use it to make  money if they couldn't pay their debt

Kinda like a home owner or a car that couldn't pay the debt

They repo it

adampeart's picture

You read my mind! I say fine, file for bankruptcy, but don't expect to keep the degree you didn't pay for.
Allow bankruptcy filings for three years and defrock the the graduate's degrees who file, immediately end all government assistance/loan and grant programs and stop backstopping loans with taxpayer money.
Return the act of due diligence to the banks giving out the loans and watch as those getting the loans receive them based on merit once again instead of being based on their "dreams." Then watch tuition plummet and watch all of the university's title 9 departments vanish....along with the spas, water slides and whatever else nonsensical amenities they built to entice potential debtors, I mean "alumni."
Banks,universities, and politicians all benefit by maintaining the status quo so what I just laid out will never come to pass.

trulz4lulz's picture

And? So if the peraon has already paid 2x the initial amount of the loan but due to other finncial obligations (home, car, food, family you know, the shit that sont matter in america anymore) you juat cant keep yp and so know you have 20grand in basically accumulated interest? Not everyone is a snowflake and not wveryone leads a charmed life, shit happens.

tmosley's picture

It's called "cutting off you nose to spite your face".

Take away the peice of paper, they still have the knowledge, and still sacrificed the time to get it, but now you are going to pretend like they don't have that knowledge, and prevent them from contributing to society.

Do you feel stupid? Because you should.

kizell's picture

This is a complete horseshit proposal.

When Donald Trump filed for bankruptcy as a result of his New Jersey casino, did that inhibit his ability to do further real Estate and commercial deals?  No, it didn't.

If you default on a car loan, is your ability to drive taken away.  No it is not.  It does of course make securing credit very difficult, but that is expected.

If you default on a mortgage, are you then outlawed from ever owning a home?  No.  It may be very hard, but still possible.

This stupid solution you have proposed is a self defeating purpose.  If the ability to earn is taken away from a bankruptcy filer, he is guaranteed to only be able to obtain a deadbeat job while needing government assistance in order to live.  This is your magic solution?  Put another citizen on the dole?