If you’ve defaulted on student loans, your monthly payment is about to go up, thanks to Education Secretary Betsy DeVos.
Secretary DeVos’s agency on Thursday killed an Obama-era rule that was put in place to stop financers of student loans from gouging students who owe past due loans. A “Dear Colleague Letter” (DCL) from Acting Assistant Secretary of Education Lynn Mahaffie told student loan providers to disregard a 2015 DCL issued by the Obama administration instructing student loan companies to cease charging defaulted borrowers fees as high as 16 percent of a loan’s principal and accrued interest.
“The Department thinks that the position set forth in the [Obama letter] would have benefitted from public input on the issues discussed in the DCL,” Acting Assistant Secretary Mahaffie’s letter states. “The department will not require compliance with the interpretations set forth in the DCL without providing prior notice and an opportunity for public comment on the issues.”
The new rule will affect approximately 4 million students and graduates whose loans are in default, collectively owing more than $67 billion. The affected students make up about 11 percent of the estimated 44 million Americans who have student debt, according to data from the Federal Reserve. And unlike credit card debt, student debt can’t be discharged through bankruptcy, thanks to laws passed in the 1970s.
Navient, one of the largest services of student loans in the country, is currently being sued in a class action lawsuit filed by two state Attorneys General and the Consumer Financial Protection Bureau for misleading and overcharging borrowers.
The New York Times reported that Attorneys General Lisa Madigan of Illinois and Bob Ferguson of Washington state are suing on behalf of millions of students whose loans are being serviced by Navient, and the plaintiffs are seeking billions of dollars in damages based on allegations that the company was purposefully burying critical information in the fine print of lengthy loan documents, and intentionally making it difficult for co-signers to be released from loan agreements.
According to the Wall Street Journal, the total amount of lingering student debt has surpassed $1.2 trillion, which is greater than the total amount of credit card debt currently held by American debtors.
Tom Cahill is a writer for the Resistance Report based in the Pacific Northwest. He specializes in coverage of political, economic, and environmental news. You can contact him via email at [email protected], or follow him on Facebook.