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The Project on Predatory Student Lending Submits Comments Regarding the Upcoming Negotiated Rulemaking to Expand “Pay As You Earn”

By Maxwell Ball, J.D. ’15

On November 4, 2014, the Project on Predatory Student Lending of the Legal Services Center, in partnership with the National Consumer Law Center, submitted comments to the Department of Education arguing that more low-income people should be entitled to greater relief in repaying their student loans. President Obama asked the Department to enact regulations to expand repayment relief to more low-income borrowers in the coming year.

The comments were drafted by clinical student Maxwell Ball and his supervisor Toby Merrill, along with nationally recognized experts Deanne Loonin and Persis Yu of the National Consumer Law Center’s Student Loan Borrower Assistance Project. They share experiences and often dire circumstances of the Project’s clients, who are low-income student borrowers struggling to repay onerous federal student loans. We propose several regulatory changes that would expand and target student loan repayment relief to more low-income borrowers. Some of our proposed changes include: removing existing restrictions on eligibility for the repayment programs based on when the loans were borrowed; simplifying and clarifying the repayment process; protecting more very-low-income borrowers from making monthly payments.  We also emphasize the importance of income-driven repayment relief for low-income parents who borrow to finance their children’s education.

We also raise several issues that the Department of Education needs to address to ensure that changes to the repayment program are effective. The Department must improve its oversight of federal student loan servicers and debt collectors, who currently fail to help and even harass and abuse borrowers. Borrowers who are at risk of defaulting on their federal student loans should be identified earlier, and helped to avoid default and its consequences. We also discuss the extraordinary harm caused by fraudulent practices at many for-profit schools, and suggest several ways that the Department could provide greater relief to borrowers who continue to suffer for many years and often decades after they were students.  Finally, we address two important ways that borrowers who have already been harmed are being prevented from obtaining relief: the overly-narrow regulatory restrictions on certain types of federal loan discharges, and sweeping arbitration clauses in for-profit school enrollment agreements and private student loan contracts.  The Department has the authority to improve safeguards and expand remedies in both of these areas, and should use that authority to help students rather than to protect corporations.