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Business and Policy Areas
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Obama Announces Student Aid Bill of Rights

March 20, 2015

President Obama unveiled a new "Student Aid Bill of Rights" during a March 10 visit to Georgia Tech. His presidential memorandum directs the secretary of education and the heads of six other federal offices to take a number of actions over the next two years to improve servicing on federal loans and increase protections for borrowers.

The Student Aid Bill of Rights principles state:

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

The directives in the memorandum focus primarily on the last principle. The federal agencies are charged with:

  • Establishing a state-of-the-art complaint and feedback system regarding federal financial aid.
  • Developing a centralized point of access for borrowers in repayment, regardless of which servicer is assigned their loans.
  • Enhancing disclosures to borrowers from Direct Loan servicers, including notifications when they become delinquent or have unfinished applications to change payment plans.
  • Ensuring contractors apply prepayments first to those loans carrying the highest rate of interest.
  • Setting up an interagency task force to monitor trends in the student loan portfolio and borrower assistance efforts. The task force will also recommend best practices in performance-based contracting ED should use with servicers.
  • Reviewing whether statutory or regulatory changes are needed to specify acts and omissions of educational institutions that borrowers should be able to use to argue against loan repayments, to strengthen servicing standards, or to change bankruptcy laws.
  • Creating pilot programs to test new methods of communicating with student loan borrowers.
  • Providing clarity on rights of borrowers in bankruptcy and how to determine whether to contest undue hardship discharges.

Many of the required actions are similar to recommendations made by a task force convened by the National Association of Student Financial Aid Administrators and the National Direct Student Loan Coalition. The associations also suggested that all servicer branding be removed from communications with borrowers and that required entrance and exit counseling be incorporated into ED's Financial Awareness Counseling Tool (FACT).

ED Cracks Down on Servicers

This initiative follows a number of steps ED has taken over the last year to try to improve Direct Loan collections, including renegotiating contracts with servicers. In February, ED announced that—after a review of 22 private collection agencies with which it contracts—the department will discontinue its 2009 contracts with five companies it found to have provided inaccurate information to borrowers. ED's investigators charged that agents of the companies, "made materially inaccurate representations to borrowers about the loan rehabilitation program" at unacceptable rates, including misinformation about the benefits to borrowers' credit reports and waiver of collection costs. The end result is unclear as the servicers are reportedly seeking review of ED's decision administratively and through the courts.

Contact

Anne Gross
Vice President, Regulatory Affairs
202.861.2544
E-mail