October 2015 New Rules
Department of Education Announces Two Final Regulations to Protect Students and Help Borrowers
The Education Department is now forcing colleges to restrict or ban certain fees, such as overdraft charges on some accounts. The federal Consumer Financial Protection Bureau is weighing new rules governing overdraft fees in the wider U.S. banking system.
2015 — With 6.9 million borrowers in default on $111.4 billion in federal student debt, and millions more either delinquent or struggling to stay current, the Education Department has struggled to ensure that former students aren’t overly burdened by student debt in an era of stagnating wages and lackluster economic growth. About 41 million Americans have federal student loans.
The rule governing banking products on college campuses sought to reverse what consumer advocates have decried as the increasing monetization of the federal student aid disbursement system, in which banks and other financial services firms teamed up with colleges to levy fees on students wishing to access their federal student loans and grants. Students are supposed to be able to receive their loans and grants without having to cough up money for the privilege. The Education Department is now forcing colleges to restrict or ban certain fees, such as overdraft charges on some accounts. The federal Consumer Financial Protection Bureau is weighing new rules governing overdraft fees in the wider U.S. banking system.
The repayment rule enables borrowers with older loans to save a bit more money on their monthly federal student loan payments, reducing for some the required monthly payment from 15 percent of their discretionary income to 10 percent, with the possibility of loan forgiveness after 20 or 25 years of steady payments. The Education Department reckons the rule helps 5 million borrowers previously ineligible to cap their payments at 10 percent of their discretionary earnings; about 1 million existing borrowers, and another 1 million future borrowers, are projected to enroll.
2014 — Close to 40 million Americans owe some $1.2 trillion on their student loans, according to the Consumer Financial Protection Bureau, an amount that’s roughly doubled since 2007.
Lawmakers Probe Big Banks Using Colleges To Target Students
The investigation, detailed in a letter sent Friday to top executives at eight banks and Higher One Holdings, a university financial services provider, raises worries that financial institutions and colleges may be engaging in payola regarding campus debit cards and bank accounts.
2012 Colleges Steal Money From Students
Colleges had generated revenue by striking deals with financial firms or had otherwise cut costs by outsourcing much of their federal student aid disbursement to outside companies, leading students to effectively pay for the right to access their federal student loans and grants in seeming violation of federal rules that prohibit such fees.
U.S. PIRG has identified that 32 of the 50 largest public 4-year universities, 26 of the largest 50 community colleges, and 6 of the largest 20 private not-for-profit schools had debit or prepaid card contracts with a bank or a financial firm.