This is Obama’s latest move in a series of changes his administration has recently taken for promoting the Americans’ affordability and access to colleges.
One of those recent implemented actions includes extending a new program that caps the students’ loan payments to 10% of an individual’s income for 20 years.
According to the experts, at the moment the student debt is more than $1.3 trillion, while the average graduate has accumulated more than $29,000 in loans taken for education purposes by the time he or she leaves school.
President Obama is going to the Georgia Institute of Technology to present his latest plan. Before doing that he told the reporters that he wants to make sure everyone in the United States can have the opportunity and the means to go to college, if willing to make an effort to succeed.
One of the main points of Obama’s new plan is to improve and simplify the interaction between the US federal government and the students.
Obama’s new presidential memorandum is called “Student Aid Bill of Rights”, and one of its goals is to have the Education Department create a new site which will simplify the way the student loan borrowers can file a complaint. Also, the new website, which should be ready by July 2016, will provide feedback and information on federal student lenders, as well as servicers, the schools and the collection agencies.
The purpose of the new portal is to help the department reply to the students’ questions and complaints in a quicker manner.
Obama’s new plan was designed to improve the interaction between the student borrowers and the loan services, as well as the way the borrower interacts with those who are in charge of collecting and applying the loan payments.
Obama said that the new plan will need help from companies like Nelnet and Navient to alert the borrower when the loan has been transferred to another company or if the borrower happens to fall behind with the loan payments.
Sarah Bloom Raskin, Treasury Deputy Secretary, said that we need to remember the hard lesson the mortgage industry has taught us, which was that there is no such thing as a quality servicing in the mortgage and loan business.
Raskin said that servicing is a crucial part of the borrower’s experience, which is not always comprehensible and transparent to those who want to borrow money.
In order to improve the service’s transparency, Obama’s administration is looking to develop a central point of access for all those who have to repay their federal student loans. The new access point will help the borrowers how to check their accounts and how to keep track of their payments. The new plan is to avoid having the individual servicer take care of all the information.
Servicers will be required to apply prepayments automatically when there is a case of a loan that has the highest interest rate, unless that loan was directed personally by the borrower.
There are many consumer groups which complain of the fact that the loan servicers who deal with students do not show them all the options that are available. The students who are trying hard to repay their loans are not aware of all the possibilities they have to pay back what they own easier.
This lack of information makes them fall behind on their payments, or worse, they wind up in default.
There are reports which question whether the servicers mislead the borrowers intentionally, in order to make more profit.
The Consumer Financial Protection Bureau has recently conducted a study which revealed that some servicers are spreading out payments across several loans in order to make the borrowers late with their fees. Also, some servicers were found to charge late fees even if the borrower is making the payment during his or her grace period.
The US government has tried to make the servicers help the borrowers by giving them incentives.
According to the Department of Education, the companies that are in charge of the government’s portfolio of student debt will receive bonuses if they agree to reduce defaults or delinquencies.
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