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Posted: 2017-04-19 14:48:30

April 11, 2017; Bloomberg

Student debt is a personal challenge for more than 44 million Americans, but a lucrative business opportunity to the firms that manage the more than $1 trillion now outstanding. With a delinquency rate currently exceeding 11 percent, some see student loans as a major risk to the U.S. economy, one rivaling the mortgage loan market that crashed in 2007. There has also been widespread concern about the effects of college debt on the lives of individual students “what authorities describe as systematic mistreatment of borrowers.” Because these loans are guaranteed or are made directly by the federal government, the U.S. Department of Education is responsible for managing this complex system and balancing the competing interests of the various stakeholders.

Last week, Education Secretary Elizabeth DeVos took action to reverse the course she inherited from the prior administration. In 2015, President Obama announced his Student Aid Bill of Rights, which aimed both to create a more efficient loan management system and to “reduce student loan defaults and encourage borrower success.” In recognizing the needs of borrowers, it sought to more fairly balance the interests of individual borrowers with those of the federal government and those doing business managing the debt under government contract. Two policy directives from the Obama administration’s Department of Education, which Bloomberg News described as directing the Federal Student Aid office to “do more to help borrowers manage, or even discharge, their debt,” were cancelled.

The Obama administration sought to balance the interests of those taking out student loans and the business interests of the private firms contracted to service and collect these debts. Ideally, by taking borrowers’ interests into account, the amount of unpaid debt would be decreased, as would the cost to the federal government, and the harmful effect of predatory practices could be lessened. In her memo to the FSA,

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