Betsy DeVos Just Threw out Some Major Reforms Meant to Help Students in Debt

April 11th 2017

Danielle DeCourcey

A memo sent by the Secretary of Education Betsy DeVos has rescinded Obama-era reforms of student loan companies.

Former President Barack Obama's administration had sent two memos last year aimed at creating a single website for student loan burrowers to pay their loans and get information, instead of having to go to individual loan servicer sites, while also providing more protections for borrowers and more accountability in customer service. The Obama memos also call for imposing penalties on companies that have "not appropriately provided" services, including barring companies from future loan allocations. The federal government filed a lawsuit against student loan giant Navient in January for accusations of improper lending practices. 


On Tuesday, DeVos sent a memo to James W. Runcie, chief operating officer of Federal Student Aid, rescinding those guidelines because the reform process showed a "lack of consistent objectives" that could cause borrowers to experience a "deficiency in service." The memo did not get more specific.

The Obama administration's reforms would likely have meant that the federal government would have to spend more money for loan contractors and loan counselors, according to Bloomberg. President Donald Trump's administration has reportedly sought to cut costs from the Department of Education. 

ATTN: spoke to Natalia Abrams from Student Debt Crisis about the rescinded reforms and what it could mean for borrowers. 

"This is yet another move from DeVos' DOE that is stripping borrowers of consumer protections," she said. "It will lead to increased defaults."

Abrams said the loss of serious penalties for loan servicers accused of wrong-doing is a big concern. 

"The most important factor is customer service and the complaints," Abrams said. "They weren't gong to continue to reward bad servicers." Navient responded to the federal government's lawsuit by saying it does not have a obligation to "act in the best interest of the consumer." Last week, Sen. Elizabeth Warren slammed Navient's response in a viral Facebook post. 

"That’s appalling. The federal government paid this company more than $100 million last year to help borrowers manage their student loans, yet this company doesn’t believe it should try to act in the best interest of students?" she wrote. "Then why the heck is the Education Department still paying them?" 

Abrams said the Obama administration's proposed single payment portal would have led to better customer service and oversight for borrowers, keeping them from default. 

"There's no reason any student loan borrower should be in default because of the income based repayment plan options, but if borrowers don't get the right counseling they will default," she said. Data released from the Department of Education last month said that 8 million people defaulted on their student loans last year; 1.1 million of those people did it for the first time.

Considering the recent policy changes from Trump's Department of Education, Abrams encouraged borrowers to send any complaints about student loan companies to the U.S. Consumer Protection Bureau instead of the Department of Education. 

"We recommend borrowers send their complaints to the Consumer Protection Bureau because of what we see coming out of the Department of Education," she said. "They're rolling back consumer protections, regulations, and they're allowing for less oversight of the student loans." 

RELATED: The Federal Government is Sending Signals That It's About to Let Down People With Student Loans