President Barack Obama took administration action Tuesday aimed at helping federal student loan borrowers navigate the repayment process and tightening rules for private companies servicing school debt.
Mr. Obama directed the Education Department to create a website that gives borrowers a simple way to lodge complaints about lenders, collection agencies and universities.
The government also will create a centralized portal for borrowers to access information about and pay their federal loans, regardless of which contractor is servicing their debt. And the presidential memorandum Mr. Obama signed Tuesday morning will implement consumer protections that require contractors to more clearly notify students of their repayment options and when their loans are transferred between servicers.
“Higher education has never been more important, but it has never been more expensive,” Mr. Obama told an audience at Georgia Tech in Atlanta where he outlined what he described as a student bill of rights. “Every student should be able to access the resources to pay for college.”
The steps will help borrowers better understand who they owe money to and their options for lowering payments and avoiding default, according to the administration.
(More: House approves bill easing 529 plan rules)
GETTING AHEAD
“The idea is to get ahead of students who are encountering challenges and make sure they have access to the information they need to help them manage their payments,” James Kvaal, the deputy director of the Domestic Policy Council, said in a conference call with reporters on Monday.
The administration will also develop recommendations for regulatory and legislative changes for student loan borrowers, including possible changes to the treatment of loans in bankruptcy.
Under U.S. law, student loan obligations can rarely be discharged in bankruptcy, making them more onerous than credit- card or mortgage debt.
Mr. Obama said the administration would take a “hard look” at whether legislation is necessary.
The moves will increase pressure on private companies hired by the government to collect from borrowers defaulting on their loans. Critics say that the firms have insisted on stiff payments even when borrowers are eligible for deferment programs, and that the companies don't do enough to make clear why students are receiving the bills and what their options are.
Officials say they will use the data collected by the complaint system, set to come online July 1, 2016, to evaluate the practices of contractors and colleges. The administration is also starting a pilot program to directly seek repayment from students in default on their federal loans.
The program is intended to “acclimate” the administration with collection practices, according to Deputy Treasury Secretary Sarah Bloom Raskin. Ms. Raskin said that while the administration doesn't envision replacing contractors with federal collectors, the pilot program would help them learn “what kind of enhancements” it could require of those servicing student debt.
The federal government holds the majority of outstanding student loan debt, more than 85%.
The White House has made college lending a central focus of the president's economic agenda. In his State of the Union address in January, Mr. Obama proposed offering free community college tuition to certain students.
