Under the Trump administration, the Department Of Education has removed Obama era protections for student loan borrowers who want to rehabilitate their loans.
By making rehabilitation of privately held loans less attractive, borrowers are more likely to opt to skip rehabilitation and immediately consolidate their FFEL loans into the Federal Direct Loan Program to take advantage of income based re-payment programs. When borrowers take this action, it moves loans from private balance sheets to the federal government’s.
Perhaps the most alarming part of this action it the Trump administration’s choice to take a scattershot, borrower un-friendly approach to the student loan crisis. Operationally, there is also the issue of ensuring the student loan servicers understand this change and train their call centers to understand this change so they can communicate it to borrowers – a task the servicers are notoriously bad at doing.
Overall, this approach seems destined to create even more confusion amongst already confused borrowers without doing anything to address the causes or symptoms of the student loan crisis.
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