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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hotrod's picture

Send the BOUNTY HUNTERS AFTER THE COLLEGES that got all the money.

sheikurbootie's picture

It was just announced that 60% of the students with "student loans" used the money to fund spring break.  What a surprise! 

hotrod's picture

This is my point earlier.  Most adults cannot handle credit prudently.  Do you think 18 year old kids can when they dont understand the world beyond their next party. In many cases it truly is predatory lending to people that dont have a clue.  There should be structure, disciplline and a plan with the college to pay it back. 

Wild E Coyote's picture

And bad parenting is somehow the problem of Government?

tmosley's picture

Yeah, it's the parents who perverted the system to allow a subsection of society access to essentially unlimited credit.

Mzhen's picture

Al Lord, who used to head up Sallie Mae, got himself a seat on the Penn State Board of Trustees so he could vote to raise tuition.

hotrod's picture

Tuition is #2 to Healthcare in the rate of Inflation.  Both are off the charts.

It is the availability of DEBT that is fueling tuition inflation and the colleges laugh all the way to the bank selling the esteemed degrees presented with FANCY ROBES and Tassles.

TeethVillage88s's picture

Just following your string.

"Tuition is #2 to Healthcare in the rate of Inflation. Both are off the charts.

It is the availability of DEBT that is fueling tuition inflation..."

- Health Care Inflation
- Tuition Inflation
- Housing Inflation
- US Dollar Deflation
- US Denominated Derivative/Assets
- Construction Finance inflation?
- US Taxes, 97 Types of Different Taxes in the USA

http://www.zerohedge.com/news/2017-02-07/over-25-trillion-us-student-and...
http://evocm.com/consumer-credit-in-the-united-states/
https://www.federalreserve.gov/releases/g19/current/
http://www.zerohedge.com/news/2014-03-25/list-97-taxes-americans-pay-eve...

sheikurbootie's picture

Somehow your student loans are NOT my problem.  Maybe I should care, but alas I DON'T! 

I was on a full scholarship that I worked my fucking ass off to get and worked it even harder to KEEP.

Lostinfortwalton's picture

I had a small student loan the last year in school and paid it back the first year in the Air Force. This was way before the schools figured out it was a green light to pump the tuition and fees to the stars.

Barney Fife's picture

Sometimes some of you guys are as bad, or worse, when it comes to your "feels" on policy as the snowflakes.

Yeah, snowflakes suck. Given. 

But these young kids are naive, misguided by idiotic adults, are programmed, and lack wisdom. And now you want to enslave them in perpetual debt bondage for the rest of their lives. 

So much for winning hearts and minds you fucking morons. 

If you want to do something to entrench the snowflake mentality, then do crap like this, which forces them to dig in their heels and double down on their insane belief system.

Ridiculous collection costs are inherently immoral, evil, and destabilizing.

Do us all a favor, stop "feeling" and start thinking. 

Schadenfreude is juvenille and a sign of an emotionally arrested person. Talk about cutting off your nose to spite your face. 

SilverRoofer's picture

Let them bankrupt but if they do the Forfeit their Degree

Same as a homeowner who doesn't pay it gets reposed

Same as a car loan that don't get repaid it gets reposed

They shouldn't be able to keep something that will enable them to earn more than others who's situation wouldn't let them go to college

They want to keep their degree payfor it 

Barney Fife's picture

This is moronic and spiteful. 

Bigly's picture

You are a twat

If it is one thing i am not, it is emotional and i do not see it in the comments where people like what trump is doing here.

Just like dems you are turning it 180 degrees.

YOU are the emotional one.  These poor naive kids.  Give them a break.... They know nothing...Do not be spiteful... a meanie!

Well know what?  I am mean. Their dire circumstances are not my problem. Not my kids. I truly do not care.

Societally it IS a problem. But bailing them out is not the answer. (moral hazard)

Going forward, colleges needs more skin in the game for negative outcomes, i.e., kid is defaulting, they get whacked.   Not the taxpayer.

There are oily characters left and right in this debacle but taxpayers should not be on the hook for these fools.  Period.

tmosley's picture

>I truly do not care.

Then fuck off.

SilverRoofer's picture

Why 

So when I want something like my mortgage forgiven then all of you going to pony up and pay for it?

There are a lot of us who never had an opportunity to go to school because of many situations.How is that fair to us if someone didn't pay for a Tool to make more money apply for Jobs we wouldn't even be able to and never paid for it? Want Joe tax payer to eat that makes no since Barney. Some of us would have loved an opportunity to go and do something we would have liked to do other than something we have hated because it paid the bills asswipe

 

crossroaddemon's picture

In this case it's not even practical. What are they going to do, force the door to my house and take away my certificate and copy of the transcripts? Half the time employers don't even bother contacting the college if you have that stuff. So they could expunge the record of your degree at the college, but a copy of the ppaerwork would probably get you a job anyway. Trying to take the degrees would be a huge waste of time and money.

tmosley's picture

Try using the more logical comparison of defaulting on a credit card or a signature loan. No-body has to "pony up" for people who default on those, so the lenders are more careful about who they lend to.

Stop enslaving people to "fix" a flawed government policy. Fix the fucking policy!

holdbuysell's picture

Something terrible has happened. Terrible.

It's as if millions of statist Krugmans screamed out in terror that their cushy salaries would be at risk if fewer bothered applying to their overpriced schools...and then were suddenly silenced.

hotrod's picture

TRUMP, TWEET ABOUT THE EXORBITANT COST OF TUITION and the burden it is putting on our young kids.

Rather than paying the BOUNTY HUNTERS to support the lenders.

Barney Fife's picture

The programs should be dramatically scaled back, the academic requirements increased, and the young public weaned off the idea of "free college". 

BUT, you don't do it this way. This is just idiotic.  Student loans are like any other debt, or at least they should be, and should be able to be discharged via Chapter 7,  AND, without massive collection fees and fines that enslave a young American for the rest of their lives. 

Debt is the most destabilizing thing that you can saddle a society with. People will do anything in their power to escape debt bondage because, as Celente says, "when you lose everything, and have nothing to lose, you lose it".

BTW, I had massive student loans in college, to the point where I had to long-term refinance them. And yes, I paid dutifully every month because I could, and because I am not a deadbeat, and I paid on time. But anyone advocating debt bondage through the present SL policies is a fucking ass hole that should lock a screwdriver into a vice and slam his head into it as hard as they can. You're not even worth wasting a bullet on your own suicide. 

The program should be scaled back drastically to only the highly academically worthy who have high odds of achieving success and hence repayment, and the structure of the debt should be no different than a mortgage or a car loan. The present policy of the past few decades is immoral as hell. 

hobo with a shotgun's picture

Higher education  is a scam. They charge way too much because people think it's necessary for survival and the government reels in the suckers and then muscles students into paying up. The schools are so badly managed that they couldn't survive without their backdoor government debt slave subsidy.

Bigly's picture

Your LAST paragraph makes a lot of sense.  

Everything else is non-sensical, hysterical blather.

TeethVillage88s's picture

I think the origins of the USA are in White Bondage, Bond Slaves, Debt Slaves, people empressed into service on Ships, then sold as Bonded Slaves who were not releases when the terms of service was up.

Yes. Bonded Slaves is a Banker kind of thing.

Good Post.

Now we have Chinese with no worker rights, no benefits, and little future... making our stuff.

While we have 97 types of Taxes, Usury, MERS Chicanery, No Documents in Court Approved Foreclosures, Toxic Derivatives, and Private Federal Reserve as biggest US Mortgage Holder...

Warm Glow, Warm and Fuzzy Feeling. S/

Jein's picture

Melania wants to fuck Putin

Megaton Jim's picture

Thank God I only owe $50,000 on my BA in Gender Studies!

shovelhead's picture

Money well invested, since back in the day all you had to do to figure out if someone was male or female was look at their crotch.

Apparently it's far more difficult now.

VW Nerd's picture

Why does Donald keep insisting on doing the right thing?  This has got to stop!

Barney Fife's picture

I still see plenty of folks sucking Trumps cock, as usual. You have no idea how fucking stupid you look cheerleading him on as if everything that he does is the right thing to do, and everything that he does is noble and just.

Not everyone here of course. In fact, there are plenty here who are just as disgusted with your existence as I am. 

I look down on you as lesser than. I really do. You don't have two goddamn brain cells to fire at each other to create a single independent thought, do you?

 

Bigly's picture

Do you live in Brooklyn or something?

Serious question.  You sound just like the strident pseudo-trendy loons I know there.

You need to get out more

shovelhead's picture

He needs a pussyhat alignment.

The ears are supposed to be on the sides of his head.

spooz's picture

Yeah, heaven forbid the elites have to pay taxes to support a bailout of the huge debt kids need to even get a CHANCE at the disappearing American Dream.  Better to bail out the banks, keep those stocks and bonds healthy.

Like, say, kid works his ass off to get into dental school.  Instead of the government supporting him with low cost loans, he is forced to take on $400,000 or more in debt, with loan origination fees totalling 4.2% up front, 6-7% interest charged from day one, so the kid ends up with more than half a million in debt before he graduates.  For the first ten years he practices, he has to pay $8000-$9000 a month to pay off the debt, living like "a part time gas station attendant for ten years" as you pay off the debt.  Nice for the government, who gets to collect all that juice.

Meanwhile, the banks get to borrow at 1.25%.  Nice gig if you can get it.

$120,000 starting salary is pretty good for starting associate dentists. Let's say that's $130,000 by the time the class of 2021 graduates. In a moderate tax state, that's about $85,000 in take home pay a year, or about $7,000 a month.

Take NYU's published cost of attendance of about $500,000 (http://dental.nyu.edu/academicprograms/dds-program/tuition.html). They fail to include the 4-5% tuition increases that are definitely coming. They also exclude inflation in living costs. They leave out Grad Plus origination fees on most everything you borrow of 4.27% upfront. They also leave out accrued interest over 4 years. The cost estimate is therefore understated (probably purposefully so you'll apply) by 30%. That means total cost is actually $650,000 for the class of 2021.

Say you're able to avoid the highest cost dental schools. Your debt is only $500,000 as a result. So let's model this.

On the Standard 10 year repayment plan, that's $5,800 a month. Remember you get $7,000 a month in take home pay, so you're left with $1,200 a month to live on. AND THAT's ONLY IF YOU DON'T GO TO THE MOST EXPENSIVE SCHOOLS!

https://forums.studentdoctor.net/threads/going-to-dental-school-will-alm...

RathdrumGal's picture

I have been an RN working in a hospital for 38 years.  The doctor's parking lot has always been separate from the regular hospital employee's lot.  Through the 80s and 90s, the cars were always much nicer in the physician parking lot.  Around the year 2000, it switched and appeared that the nurses were driving better cars.

Now I understand why.   I just can't help but be a little gleeful. 

 

 

spooz's picture

Maybe you wouldn't feel so gleeful if it was your kid or grandkid that had to take on that kind of debt to become a doctor or dentist.

spooz's picture

Misery loves company, eh?

So when the day comes that the only people that can afford to get the education neccesary for good jobs are the spawn of elites with deep pockets, and the rest of the worker units can just get used to having nothing and dying early, the world order will be as it should, right?

Xena fobe's picture

That day has already come for tax payers footing the bills.  Working Americans can't afford a $500 emergency.  If you want a constructive solution, eliminate the cause of the problem.  And I assure you, the problem was not caused by lack of tax dollars. 

tmosley's picture

>Shows zero sympathy and active contempt for young people

>Is surprised when he dies on the day of the rope

Boomers.

Xena fobe's picture

So mean of us to worry about things like our rent instead of gender studies for your anchor baby.  I know, I'll go live in my car so I can afford college for your kid. 

Xena fobe's picture

Your kid can't afford dental school so you think I should foot the bill.  Except I can't even afford to see a dentist, nevermind put your kid through school.  If your kid becomes a dentist, he will have NO problem repaying student loans. 

spooz's picture

How about the government provides low cost loans for dental/medical school, or subsidies, and requires graduates to work in public service for a few years in  exchange, then use them to provide low cost health care to people who can't afford to pay high premiums or see the dentist?  How about looking at REAL ways to reduce the cost of both educating health care workers and providing low cost service?  Nobody ever looks at those kind of solutions, except the rest of the developed world.

Also, I guess you didn't read the discussion in my link.  So, after four years of working your ass off as an undergraduate to get into dental school (taking on debt and not a lot of time for fun while you grind away competing for grades that get you to the next level), then four years of dental school, coming out with more than half a million in debt, you have to work for ten more years paying off the loan before you even begin to think about opening your own practice (more loans).  THINK AGAIN about how easy it is to get to the place where you are earning a comfortable living after all that.

whatamaroon's picture

Speaking of dentists, there are a lot of them popping up around here, I don't think there is enough of a market to absorb them all. Another example of government market distortion.

jewish_master's picture

tuation in jew land is 2000k a year. also there was a private animation school here that used to be expensive for years. the gove decided to get in and support it, however they revised the curriculum according to gov demands so it will fit the job market. there wasnt hufe demand for 3d animators, but gaming industry is picking up. thats how u get a top 20 computer science programm (TAU) in 7000k tuation.

jonebize's picture

It'll all get inflated away. 

jonebize's picture

Also, 2020's out of the picture for Trump. This is some third rail stuff. 

Nicholi Hel's picture

Total student loan debt was $640 billion when Obama took office. Simultaneously as the student loan industry was quietly nationalized, the interest rates doubled, with  tuition increasing almost 300% .  Student loan debt  increased to 1.3 trillion by 2016 and was touted by the Bellicose, Baby Boomer, Bolsheviks as an "asset. "

Moving tens of millions of no talent ass clowns into the University systems to get advanced degrees in Sophisticated Masturbation Techniques help mask the real unemployment numbers while dumping about 700+ $billion into the coffers of the "socialist" multi millionaire, loud mouthed, cocksucker professors.

The only move left to avoid defaulting or paying on the loans for the ass clowns with degrees in Feminist and gender studies is to defer the loans by enrolling in PHD programs for community organizing. Which will heap another 400 billion into the debt bubble.

So we can tack at least another trillion to the however many trillions (9? 10? 20?) in debt that the Marxist Mulatto and his sour faced cunt of wife plunged this country into, in addition to sticking the country with at least 10 million malcontent, brainwashed, hyper sensitive, snowflake fuckheads wih absurd degrees in douchebaggery. 

What an asset all this is.

 

 

shovelhead's picture

Thank Congress for this brilliant solution to a formerly non-problem of giving stupid and feckless people money for school.

 

agNau's picture

Can the FED print puppies?

Trucker Glock's picture

No, but they can destroy the value of the dollar, inflating property valuations, cost of education and all kinds of other things that drive people to borrow. Not to mention, driving up the cost of puppies.