Tuesday, March 10, 2015
Consumers Union: “Student Aid Bill of Rights” will help students manage loans, avoid default
WASHINGTON, D.C. – President Obama today announced a “Student Aid Bill of Rights” to reform the student loan system by providing more consumer protections for borrowers, helping students manage their debt, and improving federal loan servicing. This is the latest in a series of Administration efforts aimed at improving Americans’ access to higher education without the burden of unmanageable debt.
The plan includes the creation of an online complaint system for borrowers with federal student loans in order to promote quality service and accountability at the Department of Education, its contractors, and colleges. The Department of Education is also charged with improving the student-loan servicing system by simplifying disclosures, creating a single portal for all borrower inquiries, and making it easier for eligible borrowers to enroll and take advantage of income-based repayment plans.
Suzanne Martindale, staff attorney for Consumers Union, said, “For too long, student loan servicers have provided inconsistent or misleading information, muddying up a system that’s already hard for students to navigate. These reforms are really important steps toward keep borrowers in good standing on their loans, so they’re making affordable payments instead of sliding toward default.”
Pamela Banks, senior policy counsel for Consumers Union, said, “We think an online complaint system could help a lot of people get their problems fixed before their debts spiral out of control. We want the information in this database to be open and accessible so we can all spot trends, bad actors, and good actors.”
In Consumers Union’s 2013 report on student loans, Degrees of Debt, the most common complaints from borrowers were about problems with student loan repayment and servicing. Consumers Union said today’s plan would improve the disclosures and consumer protections throughout the repayment process.
The plan also requires the Department of Education to ensure that its contractors apply prepayments first to loans with the highest interest rates, unless the borrower requests a different allocation, a reform that Consumers Union has advocated for years.