Report suggests colleges up loan accountability

The recommendation builds on Obama’s Student Aid Bill of Rights released in March.

Melissa Steinken

To help students manage loan debt better and increase borrower protections, the U.S. Department of Education has outlined new recommendations for schools and borrowers.
In a report released last week in conjunction with the Department of the Treasury and the Consumer Financial Protection Bureau, the Department of Education recommended new requirements to hold colleges accountable for fraudulent acts and to create a single income-driven repayment plan for future federal loan borrowers. 
Enrollment in income-driven repayment plans is the highest it’s ever been, with an increase of more than 50 percent in the past year, the report said. 
Also among the recommendations are better data sharing and disallowing borrowers to default because of circumstances outside of their control, like the death or bankruptcy of a co-signer. 
While not official policy, the recommendations build on President Barack Obama’s Student Aid Bill of Rights, according to a press release. The student bill of rights was released earlier this year. 
Student borrowers should be entitled to fair treatment from lenders and should have a reasonable repayment plan, according to Obama’s bill of rights.
“Schools need to do more to keep costs down and help students graduate on time,” said former U.S. Secretary of Education Arne Duncan in a press release. “Congress needs to step up to hold schools accountable and provide better consumer protections; servicers owe borrowers better information about their options.”
In a separate move last week, the Department of Education released a statement of loan servicing principles to ensure students with federal loans have adequate information to avoid default and to make sure they’re treated fairly by lenders, even if they’re struggling to pay down their balances.
At the University, where the median debt of undergraduates is $21,500 — not including private or Parent PLUS loans — students are required to participate in loan repayment counseling upon graduation.
“Exit counseling is a two-way sword,” said Thomas Schmidt, associate director of student account assistance and third-party billing at the University. “The government wants to get information to the student, and the student wants information about their own loans.”
This year, to help students lessen the burden of taking out loans, the University launched one-on-one financial wellness meetings, said Nate Peterson, assistant director of One Stop Student Services.
“I recommend a student takes out only what they need,” he said. “If the first time [that] students come in is when they are about to graduate, then it might be too late [to give them information on their loans].”
Still, the University — where 45 percent of undergraduates take out a federal loan — has an overall low default rate, he said.
“In my experience, students did not realize they didn’t have to take everything they were [offered for aid],” Schmidt said. “And then they don’t know what payments on loans will be like.”