President Donald J. Trump’s latest executive order aims to begin the rollback of legislation and financial regulations tied to the Dodd-Frank Wall Street Reform and Consumer Protection Act passed by Congress during the Obama administration.
The Dodd-Frank Act, among other things, established the Consumer Financial Protection Bureau (CFPB) to regulate the consumer financial markets after the 2008 financial crisis.
But what does this mean for your wallet? And how will it impact your ability to repay student loans?
Why did the president sign this executive order?
President Trump has called the Dodd-Frank Act a “disaster” in the past, and one of his campaign promises was to “dismantle” the legislation.
According to President Trump and his top policy advisers, the Dodd-Frank Act is an example of government overreach and unnecessary regulation.
“We have the best, most highly capitalized banks in the world, and we should use that to our competitive advantage,” said Gary Cohn, a former Goldman Sachs executive who now serves as the director of the White House National Economic Council in an interview with The Wall Street Journal.
Cohn went on to say that U.S. banks are overburdened and highly regulated. He believes that rolling back the Dodd-Frank Act will be good for the economy by allowing banks to do more with their money.
Cohn also said that today’s executive order is a “table setter” for more deregulation to come.
The executive order also focuses on amending the so-called Volcker Rule, which limits the way banks can make hedge fund and private equity investments. Opponents of the rule say that it’s too vague, according to Forbes, and that repealing the rule could lead to a power shift on Wall Street.
How will rolling back the Dodd-Frank Act impact consumers?
While there is a great deal of focus on the Volcker Rule and issues related to banking, the rollback of the Dodd-Frank Act is likely to affect you more due to its potential impact on the CFPB.
The CFPB has done a great deal on behalf of student loan borrowers. They offer protection from predatory fees charged by servicers, as well as encouraging transparency from lenders and other financial services providers.
It’s even possible for you to submit a complaint to the CFPB about servicers.
However, it’s not just about student loan borrowing. The CFPB also looks at credit card servicers, mortgage lenders, and pretty much any other financial product company.
And what about student loan rates?
“If they dismantle Dodd-Frank, the banks are free to come up with any type of loans like the subprime, from 2008, which could include high-interest rate loans to students,” says Julian Rubinstein, the CEO of American Asset Management.
“The repeal would bring us back to post-2008 where banks could do pretty much anything they wanted and get bailed out by taxpayers if they fail,” explains Rubinstein, citing issues that rose following the repeal of the Glass-Steagall Act during the Clinton administration.
“Trump is setting us up for another problem,” adds Rubinstein.
Is the “fiduciary rule” on the chopping block?
President Trump’s order could also impact you in terms of whether or not you can trust your financial advisor.
The Department of Labor had created a fiduciary rule that requires investment advisers to act in their clients’ best interests. The rule was set to go into effect this April, but now it might be delayed.
Wade Henderson, president and CEO of The Leadership Conference on Civil and Human Rights, thinks that rolling back consumer protections is likely to have a major impact on the finances of many people, especially those who are the most vulnerable.
“Making the financial system more fair and transparent is essential to providing low-income and minority communities with more economic stability,” said Henderson in a press release.
“Over the past decade, our country has learned hard lessons about what happens when the game is rigged and regulators turn their backs to reckless subprime mortgages, payday loan debt traps, and shady bank account fees,” Henderson said.
What’s next for student loan borrowers under President Trump?
Close to 40 percent of student loan borrowers are concerned that a Trump administration will have a negative impact on their student loans, according to a Student Loan Hero survey.
And even though President Trump talked about changing student loan forgiveness programs, not much has been done in terms of student loans — at least not yet.
President Trump’s pick for Education Secretary, Betsy DeVos, hasn’t said much publicly about student loans either.
What you might see during the Trump administration, though, is an increase in robocalls from student loan servicers.
Consumer groups are worried that President Trump’s pick for the chair of the Federal Communications Commission might decide to roll back rules designed to protect student loan borrowers from these calls, according to MarketWatch.
Since taking office, President Trump has signed a flurry of executive orders, signaling his intent on making a number of changes during his first 100 days in office. How they are all implemented depends entirely upon Congress, the courts, and other state or local government authorities.
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1 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 5.87% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 5.87% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of Month/Day/Year, and are subject to change based on market conditions and borrower eligibility.
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4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
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