Behind on Your Student Loans? Here’s Why You Could Soon Face Higher Fees
The student loan crisis is worse than ever, with a rising number of college grads falling behind on repaying their loans. Last year alone, more than 1 million Americans defaulted on federal student loans, according to the Consumer Federation of America.
Now, Trump’s Department of Education just made its first major move on student loan issues: It’s reversing Obama-era guidelines that stopped lenders from charging huge fees to borrowers who miss payments but are still trying to catch up.
That’s right. Lenders are once again free to impose fees as high as 16% of the remaining principal and accrued interest on defaulted student loans -- even if the borrower entered a loan rehabilitation program within 60 days of missing a payment.
This fun change could affect nearly 7 million people who collectively owe $162 billion in student loans, according to the Washington Post.
Naturally, consumer advocates are blasting the decision.
“With more than 3,000 Americans defaulting on a student loan every day, this just adds insult to injury,” said the Consumer Federation of America.
So why did the Trump administration do this? In a statement, the Education Department said it was rescinding this Obama initiative because it “would have benefitted from public input,” Buzzfeed reported.
No word yet on whether it might change it back after it gets public input.
Who Will This Change Affect?
So, could this change affect you?
That depends on when you got your student loans. Students who have taken out federal loans in the last few years don’t have to worry about this.
This change applies to people who received loans through the old bank-based federal lending program known as the Federal Family Education Loan Program (FFELP). It was discontinued in 2010.
Since 2010, the Department of Education has issued federal student loans, and it doesn’t charge collection fees to borrowers who quickly agree to make good on their debts, The Atlantic magazine reported.
Bottom line: If you got your federal student loans before 2010, better not fall behind on them. You could end up paying high fees.
Your Turn: Have you ever fallen behind on your student loans?
Mike Brassfield (firstname.lastname@example.org) is a senior writer at The Penny Hoarder. His student loans are paid off, thank God.