Department of Education pressuring colleges, universities to help struggling borrowers

LANSING, Mich. (WILX) - The U.S. Department of Education reminded colleges and universities about their responsibility to help borrowers who are struggling to repay student loans.

This comes as the Trump administration begins student loan collections for millions in default.

The Department of Education estimates that about 38% of federal student loan borrowers are making payments on time. Roughly 35% are in deferment, forbearance, or have only missed a few payments. That leaves nearly 25% who are either in default or in a late stage of delinquency.

“This is the trump administration using every tool at their disposal to claw back dollars from middle-class families across the country,” said Joshua Cowen, Education Policy Professor at Michigan State University.

Federal student loan debt is a critical challenge, according to the Department of Education. So much so, the department is reminding higher education institutions of their legal responsibility to support borrowers in debt.

“Think of having a middleman between you and your bank loan; that’s not necessarily helpful,” said Ryan Fewins-Bliss, Executive Director of Michigan College Access Network (MCAN).

Fewins-Bliss says there’s almost $60 billion of student debt in Michigan, with a total of 80,000 student loan borrowers, says Cowen.

“Like $35,000 for each of those borrowers, this is going to increase costs by about $200 a month for borrowers,” said Cowen.

Under the Higher Education Act of 1965, institutions are required to keep student loan default rates in check. If those rates stay too high, too long, they could lose federal funding.

“Sending notice to all your graduates that these are requirements, that seem very reasonable, said Fewins-Bliss.

He says MCAN has worked with lawmakers to increase financial aid for students to decrease the need for loans, and the Department of Education could also help students by removing interest.

“They could be smaller, or they could be zero interest, that would help people pay off their loans,” said Fewins-Bliss.

The Department of Education plans to calculate rates of non-repayment for each institution and publish the information on the federal aid data center later this month.

“The universities, by law, have some obligation to be good faith providers of the services that students are going into debt to receive,” said Cowen.

Cowen says it’s not yet clear how institutions will respond to this legal reminder. However, Fewins-Bliss says borrowers should know their repayment options -- and that the U.S. Department of Education should offer more payment plans, if it wants to see more payments.

The Department of Education says it has initiated an outreach campaign to remind all borrowers of their repayment obligations and provide resources and support to assist.

Later this summer, the department will begin administrative wage garnishment for those in default.

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