Obama Unveils Student Aid Bill of Rights

Michael Lux News, Student Loan Blog, Student Loans 1 Comment

Appearing before thousands of students at Georgia Tech, President Obama shared his plans for student loans in the future.  His general theme seemed to be affordability of loans, and ease of use.

“Every borrower has the right to an affordable repayment plan,” said the President. “Every borrower has the right to quality customer service, reliable information, and fair treatment, even if they struggle to repay their loans.”

With that in mind, he unveiled his Student Loan Bill of rights…

The full text of the Student Aid Bill of Rights:

  1. Every student deserves access to a quality, affordable education at a college that’s cutting costs and increasing learning.
  2. Every student should be able to access the resources needed to pay for college.
  3. Every borrower has the right to an affordable repayment plan.
  4. And every borrower has the right to quality customer service, reliable information, and fair treatment, even if they struggle to repay their loans.

What does this mean for borrowers?

Most borrowers of student loans are all too familiar with long hold times, terrible customer service, and bad advice.  Sadly, many also know the headaches associated with learning your loans have been transferred and not being able to do a thing about it.

The government spends a ton of money paying the various federal loan servicers to do their job, so making the process go a little smother is certainly a reasonable goal for President Obama.

There are a number of specific goals outlined by the White House that we think could help federal student loan borrowers.

  • Creating a centralized feedback system.  Making it easy for people to share their feelings about their lender would be great.  Not only would it give borrowers a productive way to vent after they get pushed around, but it would encourage lenders to treat borrowers a little bit better.
  • Force lenders to apply prepayments towards highest interest rate loans first.  If you pay extra on your student loan, it often seems to be random how the lender will apply that extra money.  Lenders certainly don’t want you paying off your loan any sooner than necessary.  This would be a common sense rule that would help most borrowers in the long run.
  • Creating a central point of access to make student loan payments.  If you took out one student loan each year of undergrad it is possible that you have to make payments to three or more different lenders.  This is silly.  All the loans came from the federal government, it makes sense that they should all be paid at the same place.  This is idea seems like it should have been put into place long ago.

While these ideas are great and could easily be put into place, some of the other suggestions seem like a long shot.

  • Restoring bankruptcy rights to student loans.  President Obama floated the possibility of proposing legal changes to how student loans are affected by bankruptcy.  Bringing bankruptcy back to student loans would be a huge step on a number of fronts, but it would also require an act of Congress.  Floating the idea of exploring a possibility seems a long way off.  That being said, having a national conversation does seem like a necessary first step.
  • Expanding Pay As You Earn.  This proposal was initially made as part of a previous student loan speech by the president, and the Department of Education should still be working on this possibility.  While lowering payments for borrowers is definitely a good thing, if these changes don’t become law, borrowers run the risk of having payments that go up and down with each Presidency.  The earliest any of these changes would go into effect would be December of 2015.

The Bottom Line

Many of the suggestions made by the President sound like common sense improvements to existing student loan policy… others seem great in theory, but a long way off from becoming reality.

If nothing else, the President’s speech redirected national attention to student loans.  With Americans owing over a trillion dollars on student loans, it is a necessary discussion.



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These are good discussion points, but will he be able to make the changes? Unlikely in this political climate!