By Brittany Dekorte
President Trump’s education administration has told financial institutions to disregard an Obama-era memo on interest rate charges and collections.
The memo was directed at Federal Family Education Loans (FFEL), an older style of student loans that had banking agencies working with the federal government.
Newer loans are through the federal government only, and do not fall under this memorandum. According to the US Department of Education, 7 million people hold $162 billion in FFEL loans, and FFEL loans account for almost half of student loan defaults, as reported by the Washington Post.
The memo, which was published in March of 2015, set to cut back on these defaults, stating “All student loan borrowers should have access to an efficient and responsive complaint and feedback system that holds loan servicers accountable and promotes transparency, the information and flexibility they need to repay their loan responsibly and avoid default, and protections to ensure that they will be treated fairly even if they struggle to repay their loans.”
The guidelines set out in this memo did so by keeping agencies from charging fees that added up to over 16 percent of the amount borrowed, and by getting borrowers into government loan rehabilitation programs.
Lori Trapp is the Director of Financial Aid at Washtenaw Community College. According to Trapp’s office, 33 percent of students at WCC rely on financial aid. “Last time FFEL loans were given out was in 2010,” Trapp said.
Students who took out loans before 2010, whether they are still in school, have already graduated, or have returned to school could be affected by these changes. With the lifting of the caps, they could see rate hikes, and less help with paying back their loans.
“Students are always welcome to come and ask questions, even if they haven’t been to WCC since before 2010,” Trapp said. “We have information on the terms and conditions of repayment plans.”