FFEL Student Loan Protections Taken Back
According to a recent story in the Washington Post, consumers who have defaulted under the Federal Family Education Loan (FFEL) Program no longer have the protections afforded by an Obama-era directive that prohibited guaranty agencies from charging fees for up to 16 percent of the loans’ principal and interest if, within 60 days of default, the consumer took advantage of a loan rehab program.
The Trump Administration issued a letter taking back the protections, saying that there should have been public input in the matter. While this doesn’t impact those who have U.S. Department of Education loans, those who received loans under the FFEL program and who are in default or loan rehabilitation will be affected.
A letter from Senator Elizabeth Warren and Rep. Suzanne Bonamici implored Education Secretary Betsy DeVos to keep the fee prohibition in place. The legislators wrote, “We are deeply concerned about the number of student loan borrowers who continue to face delinquency and default and who struggle to repay their debts. More than 4 million – or approximately one-quarter – of borrowers of non-Department-held FFELP loans are in default on roughly $66 billion. Permitting guaranty agencies to assess a 16% fee on any borrower in rehabilitation removes an incentive for borrowers to take quick action to cure their defaulted loans and avoid remaining in default.”
The legislators pointed out that consumers with default of student loans can have their social security benefits and tax refunds withheld, their wages garnished, and their credit damaged. Those in default can also be prevented from obtaining additional federal student aid.