The way in which borrowers pay back their federal student loans – from checking the balance to filing complaints against servicers – is set to change with the signing of a presidential memorandum Tuesday.
The Washington Post reports that President Obama is expected to continue promoting college access and affordability by directing federal agencies to overhaul government funded student loans.
With student loan debt now averaging $29,000 for borrowers leaving school with a Bachelor’s degree, the so-called Student Aid Bill of Rights aims to streamline the process of paying and managing federal student loan debts.
“All borrowers should be able to rely on a system in which servicers, schools and the government provide information and resource to help them manage their loans successfully,” Education Treasury Deputy Sarah Bloom Raskin tells the Post. “The steps that the president is announcing is going to refocus our system on borrowers.”
Specifically, the memorandum will establish two centralized websites allowing borrowers to view their loan information more easily, while creating mandates for servicers to more clearly disclose changes to the debt and provide fair, affordable payment requirements.
The first site, which will be created by the Dept. of Education by July 2016, focuses on giving borrowers a simple way to file complaints and feedback about federal student lenders, servicers, collection agencies and schools.
The second site will function as a centralized portal establishing an access point for all borrowers to check their balances and make payments, no matter what company services their loans.
As part of the site, loan servicers will be required to provide clear disclosures notifying borrowers when loans are transferred from one servicer to another, as well as how borrowers can change repayment plans if desired.
Additionally, the new portal includes requirements to ensure that borrowers’ payments are applied fairly. Servicers must now automatically apply prepayments to loans with the highest interest rates unless borrowers direct them otherwise, the Post reports.
The President’s Student Loan Bill of Rights is similar to the Student Loan Borrower’s Bill of Rights legislation Illinois Senator Dick Durbin introduced last year.
“Today’s announcement is a clear indication of President Obama’s commitment to student borrowers – it is a commitment that we share,” Durbin said in a statement.
While the Senator commended the White House’s latest student loan actions, he said it doesn’t excuse Congress from taking additional steps to protect all private and federal student loan borrowers.
In fact, Durbin plans to introduce the Fairness for Struggling Students Act that aims to once again allow private student loan debt to be discharged in bankruptcy.
Obama plans to make it easier to pay your student loans [The Washington Post]
by Ashlee Kieler via Consumerist
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