Top Student Loan News Stories of 2018

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As 2018 draws to a close, we’re taking a look back at what’s happened in the world of student loans. With more than 44 million Americans owing $1.48 trillion, student loans have remained a hot-button topic with no easy answers.

From controversy over the Public Service Loan Forgiveness program to court cases against the nation’s biggest student loan servicer, here are some of the top developments in student loan news over the past year.

1. Judge says no more roadblocks from DeVos on ‘borrower defense to repayment’

Introduced during the Obama administration, the borrower defense to repayment program cancels student loan debt for those who were defrauded by for-profit colleges.

About 48,000 claims for debt forgiveness had been granted when Secretary of Education Betsy DeVos halted the program in July 2017, claiming that the rules made it too easy for borrowers to get their loans discharged.

After more than a year of delays, a judge ruled in October of this year that the roadblocks were unconstitutional and that the borrower defense to repayment program must resume without further delay.

Given the fact that 106,000 borrowers were waiting to hear on their application status, this ruling could help a lot of defrauded students get released from their student loan debt.

2. Americans default on student loans in record numbers

With the student loan burden heavier than ever, it’s not surprising that more than 1 million Americans default on their student loans every year. More than 5 million Americans had defaulted on their student loans by the end of 2017.

What’s more, students of color are shouldering heavier debt burdens and showing higher rates of default than white students. Nearly 1 in 2 African-American students who started school in 2003, for instance, went into default at some point over the ensuing 12 years.

If the student loan crisis continues the way it has been, the Brookings Institution predicts that nearly 40% of borrowers will default on their student loans by 2023.

3. Navient audit surfaces

In January 2017, the Consumer Financial Protection Bureau (CFPB) announced it was suing Navient, one of the nation’s largest student loan servicers, for “failing borrowers at every stage of repayment.”

Since then, five states — California, Illinois, Mississippi, Pennsylvania and Washington — have also sued Navient for unfair and deceptive practices.

And this past fall, an audit of Navient by the Department of Education said it had sometimes failed to let struggling borrowers know about all their options, costing them extra money in the long run. In fact, the department carried out this audit in 2017 but reportedly kept the findings under wraps, even as the various lawsuits surrounding the company proceeded.

Among the complaints against Navient, which services more than $300 billion in student loans for 12 million customers, are that it applied payments incorrectly and failed to inform borrowers about their options, such as income-driven repayment plans.

If you’ve had bad experiences with your student loan servicer, remember that you might be able to switch to a new one through direct loan consolidation or student loan refinancing.

4. Many Public Service Loan Forgiveness (PSLF) borrowers remain in limbo

Signed into law in 2007, the PSLF program offers loan forgiveness to borrowers who work in public service for at least 10 years. But when the first borrowers became eligible in 2017, many reported that their applications for loan forgiveness went unanswered.

According to CNBC, more than 30,000 people had applied for student loan discharge through PSLF as of September 2018, but only 96 actually got it. That’s less than 1% of applicants.

What’s more, House Republicans suggested abolishing the program altogether with the PROSPER Act. However, with Democrats having gained control of the House in the 2018 midterm elections, the PROSPER Act now looks unlikely to pass.

Still, this opposition to PSLF sends a message to borrowers that the program might not be around forever. And even in its current form, qualifying for forgiveness can be tricky if you don’t fill out all the paperwork correctly.

If you’re working toward PSLF, make sure you’re careful about fulfilling all the application requirements, so that your request doesn’t get delayed or even denied on a technicality.

5. U.S. student loan ombudsman resigns in protest

When the Trump administration closed the Office of Students and Young Consumers, the only federal office tasked with protecting borrowers, student loan ombudsman Seth Frotman resigned in protest.

As student loan ombudsman, Frotman’s job was to protect education loan borrowers from predatory lending practices. In his resignation letter to then-CFPB Director Mick Mulvaney, Frotman wrote: “Unfortunately, under your leadership, the bureau has abandoned the very consumers it is tasked by Congress with protecting. Instead, you have used the bureau to serve the wishes of the most powerful financial companies in America.”

6. Midterm elections may change student loan environment

With more millennials running for office, student loans was a topic of discussion in November’s midterm elections.

Not only did those running for office cast a spotlight on this national crisis, but some candidates were also candid about their own struggles with student debt, such as Natalie Higgins of Massachusetts and Matt Lesser of Connecticut. The two newly re-elected state representatives are each working on legislation that would require student loan servicers in their respective states to abide by consumer protections.

Although the future of student loan legislation remains unclear, the Democrats’ win at the House of Representatives suggests they’ll be able to conduct strict oversight of Department of Education policies and decisions.

7. Another for-profit college chain shuts down

Over the past few years, several for-profit college chains have shut their doors, including ITT Technical Institute and Corinthian College.

The latest victim is the Education Corporation of America, a major operator of vocational training programs, which said earlier this month that it was closing more than 70 campuses.

The closure leaves over 20,000 students stranded, as many will have trouble transferring their credits or partially completed degrees to another school.

8. IRS ruling allows a 401(k) match for student loan repayment

In August, the Internal Revenue Service issued a new ruling that could help student loan borrowers balance debt payoff with saving for retirement. This ruling approved a new type of benefit which involves a company 401(k) match in exchange for paying off student loans.

As long as the employee pays at least 2% of their income toward student loans, an employer can make a 5% matching contribution to their 401(k). Previously, the employee had to put money into the 401(k) to get a match.

This ruling could make it easier for borrowers to focus on student loan repayment while still securing their finances for the future.

9. New game show has contestants competing to get student loans paid off

With millions of Americans struggling with student loans, and few solutions in sight, a new game show decided to take things into its own hands.

Debuting in July 2018, “Paid Off” has indebted contestants compete in trivia and other games. All the players have a chance to win money toward their student loans, but the grand prize winner gets 100% of their debt wiped clean.

Devised by actor-comedian Michael Torpey, this student loan-busting game show runs on TruTV.

Be on the lookout for student loan changes in 2019

With the cost of tuition higher than ever, and Americans taking on even greater amounts of student debt, we can expect student loans to be a part of the national conversation for years to come.

People continue to debate the best path forward, with some experts calling for a complete forgiveness of our national student debt, and others saying that forgiveness programs are too generous.

Given all the different opinions, we’re sure to see more changes to student loan policy in the coming year, so stay informed to ensure you make the best decisions for your student debt.

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Advertiser Disclosure

Student Loan Hero Advertiser Disclosure

Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print to help you understand what you are buying. Be sure to consult with a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time.

Advertiser Disclosure

Student Loan Hero Advertiser Disclosure

Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print to help you understand what you are buying. Be sure to consult with a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time.

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