Welcome to Student Loan News, a weekly summary of developments and events affecting college debt in the U.S. Join us each Friday for a look at goings-on that could impact your own student loan situation.
DeVos proposes separating student aid from Department of Ed
Education Secretary Betsy DeVos stated the administration’s desire on Tuesday to shift the federal government’s $1.56 trillion student loan portfolio to an independent governmental agency.
Speaking at the annual Federal Student Aid (FSA) Training Conference in Reno, Nev., DeVos said the transition would allow an “apolitical board of governors” to better manage the portfolio, according to Politico’s reporting.
“FSA’s mission is to serve students and families,” she said, “but its structure is set up to serve politicians and their policies.”
How it affects YOU: DeVos’ declaration was not a formal proposal, and legislative language had yet to be written. Such a seismic shift would require Congress to act, and it’s not clear both sides of the aisle are so inclined. House Education and Labor Chairman Bobby Scott (D-Va.), for example, told Politico: “There’s nothing that could be done with a new agency that can’t be done today.”
FSA offers sneak peek at new loan-servicing platform
Another piece of big news from the FSA Training Conference came not from DeVos, but Mark Brown. The FSA’s chief operating officer provided a preview of NextGen, the forthcoming student loan servicing system.
Announced in 2017 and initially slated to debut in 2019, NextGen has yet to fulfill its promise as a one-stop-shop for federal loan borrowers. Still, Brown spoke highly of three tools that will be featured in the new platform:
- Ask “Aiden”: The virtual assistant built with artificial intelligence would be a point of contact for students with questions about paying for college or repaying their loan debt.
- Informed Borrower Tool: A likely replacement for federal loan entrance counseling, this tool would help students forecast their loan repayment.
- Loan Simulator: After inputting their personal information and academic goals, students would receive personalized options to consider for financing their education.
How it affects YOU: It wasn’t immediately clear when NextGen will come to life, but its eventual arrival will, hopefully, improve your federal loan repayment experience. As we learn more about NextGen, we’ll be sure to pass along the details.
Also in the news…
- Late last week, DeVos announced that the Education Department would prioritize federal grants in “economically-distressed communities” or Opportunity Zones. Over 8,700 such zones were selected nationally by governors.
- Sen. Cory Booker (D-N.J.) unveiled a $100 billion plan to support Historically Black Colleges and Universities (HBCUs), the New York Times reported on Tuesday. Booker is one of several Democratic presidential candidates to promise new investment in HBCUs and other Minority-Serving Institutions (MSIs).
- Leaders of the Senate’s Health, Education, Labor and Pensions Committee agreed to permanently reauthorize $255 million for HBCUs and MSIs, according to Politico’s reporting on Wednesday. There had been concern that the funding would be allowed to expire.
- In a column published Monday, the Guardian criticized presidential hopeful Joe Biden’s support of 2005 legislation that made it more difficult for private student loan borrowers to discharge debt via bankruptcy. For its part, the Biden campaign said it would reverse course if the former senator and vice president wins the 2020 election.
- Federal student loan borrowers eligible for a disability discharge aren’t receiving prompt relief, according to NPR’s Wednesday report. Documents obtained from an Education Dept. official showed that just 28% of borrowers deemed eligible between 2016 and 2019 had or were set to have their loan balance wiped clean.
- Sen. Rand Paul (R-Ky.) introduced the Higher Education Loan Repayment and Enhanced Retirement Act, the Associated Press reported Tuesday. The bill would allow student loan borrowers to withdraw up to $5,250 from retirement accounts and apply it toward their debt — without facing a tax or penalty. Parents and spouses would also be able to make such withdrawals to pay for college. Still, even such legislation were to pass, dipping into 401(k)s and IRAs isn’t something to be done lightly.
News can be useful, but if you want some deeper advice, take a moment to sign up for the Student Loan Hero weekly digest email and get valuable financial knowledge sent straight to your inbox … for free!