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.
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.
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.
Interested in refinancing student loans?Here are the top 6 lenders of 2019!
|Lender||Variable APR||Eligible Degrees|
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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 7.89% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 6.97% 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.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 08/21/18. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at firstname.lastname@example.org, or call 888-601-2801 for more information on ourstudent loan refinance product.
© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
APR stands for “Annual Percentage Rate.” Rates listed include a 0.25% EFT discount, for automatic payments made from a checking or savings account. Interest rates as of 11/8/2018. Rates subject to change.
Variable rate options consist of a range from 3.27% per year to 6.09% per year for a 5-year term, 4.64% per year to 6.14% per year for a 7-year term, 4.69% per year to 6.19% per year for a 10-year term, 4.94% per year to 6.44% per year for a 15-year term, or 5.19% per year to 6.69% per year for a 20-year term, with no origination fees. APR is subject to increase after consummation. The variable interest rate will change on the first day of every month (“Change Date”) if the Current Index changes. The variable interest rates are based on a Current Index, which is the 1-month London Interbank Offered Rate (LIBOR) (currency in US dollars), as published on The Wall Street Journal’s website. The variable interest rates and Annual Percentage Rate (APR) will increase or decrease when the 1-month LIBOR index changes. The variable interest rates are calculated by adding a margin ranging from 0.98% to 3.80% for the 5-year term loan, 2.35% to 3.85% for the 7-year term loan, 2.40% to 3.90% for the 10-year term loan, 2.65% to 4.15% for the 15-year term loan, and 2.90% to 4.40% for the 20-year term loan, respectively, to the 1-month LIBOR index published on the 25th day of each month immediately preceding each “Change Date,” as defined above, rounded to two decimal places, with no origination fees. If the 25th day of the month is not a business day or is a US federal holiday, the reference date will be the most recent date preceding the 25th day of the month that is a business day. The monthly payment for a sample $10,000 loan at a range of 3.27% per year to 6.09% per year for a 5-year term would be from $180.89 to $193.75. The monthly payment for a sample $10,000 loan at a range of 4.64% per year to 6.14% per year for a 7-year term would be from $139.65 to $146.76. The monthly payment for a sample $10,000 loan at a range of 4.69% per year to 6.19% per year for a 10-year term would be from $104.56 to $111.98. The monthly payment for a sample $10,000 loan at a range of 4.94% per year to 6.44% per year for a 15-year term would be from $78.77 to $86.78. The monthly payment for a sample $10,000 loan at a range of 5.19% per year to 6.69% per year for a 20-year term would be from $67.05 to $75.68.
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
3 Important Disclosures for SoFi.
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.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown.
All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 2.28% effective October 10, 2018.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.57% – 6.97%1||Undergrad & Graduate|
|2.47% – 6.99%3||Undergrad & Graduate|
|2.68% – 8.77%4||Undergrad & Graduate|
|3.24% – 6.66%2||Undergrad & Graduate|
|2.61% – 7.35%5||Undergrad & Graduate|
|3.01% – 9.75%6||Undergrad & Graduate|