Obama Administration Expands Efforts to Help Americans Manage Student Loan Debt

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Obama Administration Expands Efforts to Help Americans Manage Student Loan Debt

New proposal will expand 10% monthly caps to as many as six million borrowers, regardless of when they originally borrowed.
July 7, 2015

Continuing its work to make student loan debt more manageable, the U.S. Department of Education today announced its plans to provide an additional six million federal loan borrowers access to student loan payments capped at 10 percent of income.

Last year, as part of his year of action to expand opportunity for all Americans, President Obama issued a Presidential Memorandum directing the Department to propose regulations to ease the burden of student loan debt by expanding repayment options available to borrowers and building awareness of income-driven repayment plans.

"A college education is one of the most important investments that Americans can make in their futures. Unfortunately, for too many hardworking families, it feels like a higher education is simply slipping out of reach," said U.S. Secretary of Education Arne Duncan. "This proposal is an investment in our economy's future that provides targeted benefits to even more borrowers, so they can stay current on their loans and furthers our commitment to lifting the burden of crushing student loan debt."

In addition to expanding the 10 percent payment cap to millions of Americans, this proposal, which will be published in the Federal Register later this week, also contains other improvements, including:

  • Creating a streamlined process to identify military service members who hold Federal Family Education Loan (FFEL) Program loans and who are eligible for lower interest rates while they are on active duty, a process that the Department already uses for servicemembers with Direct Loans.
  • Requiring guaranty agencies to contact FFEL Program borrowers who rehabilitated their defaulted loans to provide them information on repayment plans, including income-driven repayment options, to help them decide which repayment plan to choose.

Along with the proposals announced today, the Department has begun implementing President Obama's Student Aid Bill of Rights. These actions will help student borrowers who may struggle to repay their loans:

Protecting Social Security benefits of Borrowers with Disabilities who may qualify for a loan discharge or other repayment options

  • Beginning in 2016, the Department and the Social Security Administration (SSA) will conduct regular data matches to identify federal student loan borrowers who may be eligible for a Total and Permanent Disability (TPD) loan discharge. Once we identify eligible borrowers the Department will take steps to stop collection actions to ensure that the borrower's Social Security disability insurance benefits are not reduced to repay the student loans.
  • The Department and SSA are working together on ways to identify borrowers who receive Supplemental Security Income (SSI) or Social Security Disability Insurance (SSDI) and could potentially benefit from income-driven repayment plans.
  • The Department of Education will then contact these borrowers with targeted, customized communications about the available repayment options and loan discharges, and instructions on how to access these options.

Ensuring that the Debt Collection Process for Defaulted Federal Student Loans is Fair, Transparent, and Reasonable

  • Earlier this year, the Department of Education began to wind down contracts with five private collection agencies that provided inaccurate information to borrowers. The Department is also revising existing contracts to ensure the proper balance between the interests of the borrower and of the taxpayer as well as increasing the Department's oversight capabilities.
  • As of last week, the Department has changed how collection agencies are compensated to ensure that borrowers receive the best advice about how to get a loan out of default based on their own circumstances.
  • The Department has also increased guidance to collection agencies to ensure they are providing borrowers with accurate information.
  • The Department's work to improve the debt collection process is ongoing and additional actions will be announced in the months to come.

Providing Clarity on Borrowers Seeking a Discharge in Bankruptcy
In response to questions about the standards for obtaining an undue hardship discharge in bankruptcy, the Department is issuing a Dear Colleague Letter that provides guidance to guarantors and institutions participating in the Federal Family Education Loan Program and the Federal Perkins Loan Program. This guidance mirrors the Department's existing practice for the Direct Loan program and for Department-held FFELP and/or Perkins loans.