To help borrowers “avoid falling behind” on payments, the program requires loan servicers “to be more transparent,” said Katie Zezima in WashingtonPost.com. These middlemen will have to better inform borrowers when they become delinquent on loans and work with them to avoid accumulating large fees. Loan servicers will also be required to tell borrowers “when their loans are transferred from one servicer to another.” In addition, the Department of Education will explore whether trained federal employees should replace private contractors as collectors of overdue loans.
“Obama gave a stirring speech,” said David Nicklaus in the St. Louis Post-Dispatch, but his changes will do little to address the “reasons students get in debt trouble in the first place.” One in seven college borrowers defaults within two years, “five times the delinquency rate on credit cards.” That’s because most student borrowers simply don’t understand how high their monthly payments will eventually be . And once they graduate, they find it’s “easy to let payments slide,” since it’s not as if the bank can come and repossess a diploma. “A real bill of rights” would shield borrowers from the “predatory” practices of many colleges and universities. “Some institutions, especially for-profit colleges, have high dropout rates and little success placing graduates in good jobs, but students don’t learn that until it’s too late.”
If Obama truly wanted to help students, said Mandi Woodruff in Yahoo.com, he’d start by trying to slow the skyrocketing cost of tuition. Average college costs have “risen 12-fold in the last three decades.” But since federal loan amounts are tied to the costs of a particular school, colleges have little incentive to keep tuition in check—they know the government will pick up the difference. “Unless that incentive changes,” says higher-education expert Judah Bellin, “student loan debt will remain a problem.”
