The Bankrate promise
At Bankrate we strive to help you make smarter financial decisions. While we adhere to strict , this post may contain references to products from our partners. Here's an explanation for .
Last week, the U.S. Department of Education allegedly told federal student loan servicers to hold off on communicating with borrowers about student loan payments resuming on Aug. 31. Plus, the department released multiple regulatory proposals aimed at increasing college accountability and equitable access to higher education. Here’s what you need to know about this week’s student loans trends and how they could impact your balance.
2 current trends within student loans for the week of Aug. 1, 2022
1. Education Department allegedly instructs servicers to hold off on communication about student loan repayment
As the federal student loan payment pause nears its end on Aug. 31, the Education Department has allegedly told federal servicers to not communicate with borrowers about repayment, according to a report by the Wall Street Journal.
This information comes at a confusing time for federal student loan borrowers. The student loan payment pause has been extended six times since March 2020, though many expected Aug. 31 to be the final expiration date. However, servicers are required to send borrowers a billing notice at least 21 days before their first payment due date. If the administration has instructed servicers to refrain from sending out billing statements, it could mean that another extension of the payment pause is on the way.
How this affects student loans
The last time the student loan pause was extended, loan servicers were similarly told to hold off on communication with borrowers. However, while this latest news could be an indication of another extension, the administration has yet to officially comment. At this time, borrowers should keep an eye out for information from their servicer and prepare for the resumption of their payments as scheduled.
2. New regulatory proposals aim to improve college accountability and protect students
Last Tuesday, the Department of Education (ED) released another round of proposed regulatory changes focused on college oversight and access. According to the department’s press release, the changes are a “continuation of the department’s commitment to protecting students and taxpayers and building a stronger, more accessible higher education system.”
If a consensus is reached, here’s what the regulatory program proposals would do to protect borrowers:
- Protect veterans and service members by strengthening the 90/10 rule: The 90/10 rule requires for-profit schools to obtain at least 10 percent of revenue through sources other than federal education assistance. However, schools have been getting more funding from the Education Department through a loophole in which they recruit veterans and service members without needing a private investment. The new rules would close this loophole and ensure that these students will no longer be subjected to predatory recruitment.
- Clarify institutional procedures around changes in ownership to protect students and taxpayers: When a school changes hands or status (like converting from for-profit to nonprofit status), new regulations would require it to provide a 90-day notice to students and the Department of Education. This would reduce risks of insider involvement and improper financial benefits to affiliates of that college.
The Education Department has also proposed making incarcerated students Pell Grant-eligible by July 2023.
How this affects student loans
This round of proposals will most directly affect veterans, who have been subject to predatory recruitment tactics by for-profit colleges, and incarcerated individuals, who have long been denied access to student aid in the form of federal Pell Grants.
These proposals have entered the first stage of the federal student loan regulatory change process, also known as negotiated rule-making. As of now, these proposals are open for public comment on the Federal Register for 30 days and will then be discussed by a panel of negotiators. If a consensus is reached, the new regulations will be implemented in 2023.
Here’s how you can get prepared
Whether you’re new to student loans or well into repayment, it’s wise to stay informed about how your student loan rates could change. During 2022, more opportunities for cheaper loans or loan forgiveness could open up; keep an eye on the Bankrate student loans news hub for the latest trends.