This week it was reported that it was reported that the U.S. Department of Education reported that it had instructed the federal servicers for student loans that they should hold off communicating with students about payments to their loans which will resume on August. 31. In addition, the department announced various regulatory plans that aim to improve college accountability and ensuring equal admission to universities. Here’s what you should know about this week’s trends in student loan trends and how they may affect your loan balance.
Two Recent Trends In Student Loans For The Week Of August. 1, 2022.
1. Education Department Allegedly Instructs Servicers To Hold Off Communications Regarding Student Loan Repayment
As the suspension of federal student loan payments is set to expire on August. 31st and the Education Department has allegedly told federal servicers not to communicate with borrowers regarding repayment in accordance with an article in The Wall Street Journal.
This news arrives at a time of confusion for federal students who are borrowers of student loans. This pause in student loan payments was extended several times since March 2020, but most people were expecting the date of Aug. 31 as the last date for expiration. However, service providers are obliged to mail borrowers an invoice within 21 days of the date of their first due date for payment. When the government has directed servicers not to send bills it could mean an extension to the payment suspension could be in the works.
What Impact Does This Have On Student Loans?
When the last suspension of student loans was granted loan servicers were also instructed to halt contact with customers. Although this latest announcement may indicate a possible extension but the administration has not yet made a formal declare a position. As of now it is recommended that borrowers keep an eye on details from their servicer as they be prepared for the return of their regular payments.
2. New Regulations Aim To Increase College Accountability And Safeguard Students
On Tuesday on Tuesday, on Tuesday, the Department of Education (ED) issued a second round of proposed regulatory changes focusing on access and oversight of colleges. The department’s announcement on press releases states the proposed changes are an “continuation of the department’s commitment to protecting students and taxpayers and building a stronger, more accessible higher education system.”
If there is a consensus on a proposed regulatory program could provide to help protect the borrower:
- Help protect veterans and service members by enforcing the 90/10 rule. 90/10 rule requires schools that are for profit to secure at least 10 percent revenues from sources that are not federal education aid. But, they receive more money through the Education Department through a loophole that allows them to solicit veterans and military without requiring any private investment. The new rules will shut this loophole and guarantee that students won’t have to be snatched up by prey-type recruiting.
- Establish clear institutional procedures regarding changes in ownership , to safeguard taxpayers and students. When the ownership of a school changes or status (like moving from for-profit to non-profit status) the new rules would require it to issue an initial 90-day notice to students as well as officials from the Department of Education. This could reduce the chance of insider involvement as well as insufficient financial benefits for associates of that college.
The Education Department has also proposed that incarcerated students be eligible for Pell Grant until July 2023.
What Does This Mean For Student Loans?
This proposal is most likely to affect veterans who have faced unfair recruitment practices by private colleges and those in prison who have been excluded from receiving aid for students through Federal Pell Grants.
The proposed changes have been accepted into the first phase of federal regulations for student loans process, which is also called the negotiated rule-making process. In the moment, these proposals are open to public comment in the Federal Register for 30 days and will then be reviewed by a group of negotiators. If a compromise is reached then the new rules are expected to be put into effect in 2023.
