Tuesday, April 11, 2017

DeVos dials back consumer protections for student loan borrowers - The Washington Post

DeVos dials back consumer protections for student loan borrowers - The Washington Post:

DeVos dials back consumer protections for student loan borrowers


Education Secretary Betsy DeVos on Tuesday withdrew a series of policy memos issued by the Obama administration to strengthen consumer protections for student loan borrowers.
The Education Department is in the middle of issuing new contracts to student loan servicing companies that collect payments on behalf of the agency. These middlemen are responsible for placing borrowers in affordable repayment plans and keeping them from defaulting on their loans. But in the face of mounting consumer complaints over poor communication, mismanaged paperwork and delays in processing payments, the previous administration included contract requirements to shore up the quality of servicing. Companies complained that the demands would be expensive and unnecessarily time consuming.
“This process has been subjected to a myriad of moving deadlines, changing requirements and a lack of consistent objectives,” Devos said Tuesday, in a letter addressed to James  W. Runcie, who heads the Federal Student Aid office at the department. “We must promptly address not only these shortcomings but also any other issues that may impede our ability to ensure borrowers do not experience deficiencies in service. This must be done with precision, timeliness and transparency.”
DeVos has withdrawn three memos issued by former education secretary John King and his under secretary Ted Mitchell. One of the directives, which was later updated with another memo, called on Runcie to hold companies accountable for borrowers receiving accurate, consistent and timely information about their debt. The 56-page memo called for the creation of financial incentives for targeted outreach to people at great risk of defaulting on their loans, a baseline level of service for all borrowers and a contract flexible enough to penalize servicers for poor service, among other things.
The Obama administration requested routine audits of records, systems, complaints and a compliance-review process. It also directed Runcie’s team to base compensation on response time to answering calls, completing applications for income-driven repayment plans, errors made during communications and the amount of time it takes to process payments. Another memo insisted FSA consider a company’s past performance in divvying up the student loan DeVos dials back consumer protections for student loan borrowers - The Washington Post:

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