For several years now the government has offered federal student loan forgiveness programs aimed at helping borrowers to avoid defaulting on their debts. While recent reports have shown that the popularity of the programs has exceeded expectations, a group of six senators say the Department of Education could do more given the billions of dollars in payments it receives from federal loans each year.
Six senators — Sen. Elizabeth Warren (MA), Sen. Sherrod Brown (OH), Sen. Jeff Merkley (OR), Sen. Richard Blumenthal (CT), Sen. Tammy Baldwin (WI), and Sen. Edward Markey (MA) — sent a letter [PDF] to Secretary of Education Arne Duncan scolding the Department for turning federal student loans into a source of revenue while students struggle to make ends meet.
The Department is “squeezing students who are struggling to get an education” in order to maximize profits, the senators say, pointing to the Congressional Budget Office’s most recent estimates indicating that the federal government is expected to produce $110 billion in profits from its student loans over the next decade.
“Congress did not create federal student loans to generate revenue for the federal government – to the contrary, it gave the Department of Education a host of tools to ensure that federal student loan borrowers are treated fairly and with dignity,” reads the letter.
Instead of using those tools and following Congress’ directives, the senators say the Department has continued to let student loan borrowers be buried in debt.
As an example, the letter cites the Department’s failure to give borrowers a clear idea of how to exercise an option under the Higher Education Act that allows for the cancellation of student loan borrowers’ debts the college acts in a way that hurt the quality of their education or their finances.
“Similarly, the Department of Education has broad authority to compromise, modify, discharge, and cancel student debts,” the letter states. “Instead, the Department continues to gouge borrowers who struggle to meet their payments, subjecting them to debt collection, wage and benefit withholding, and other harsh penalties even when it is clear that the debtors can not pay.”
The senators also pointedly accuse the Department of failing to protect students from collapsing for-profit college chain Corinthian Colleges Inc. last year.
“The Higher Education Act also requires the Department of Education to offer student loan discharges to students whose colleges close their doors,” the letter states. “Instead, last year the Department of Education undertook an elaborate plan to use federal funds to bail out …Corinthian Colleges, Inc. and deprive students of the ability to discharge their federal student loans.”
The senators say they aren’t asking the Department to stop making money off federal loans, they are asking that more steps be taken to ensure “vulnerable young people struggling with the burden of federal student debt have meaningful opportunity to build a sting future for themselves and their families.”
Senators to Education Department: Stop Profiting Off Student Loans and Fulfill Congressional Directives to Help Struggling Borrowers [Sen. Elizabeth Warren]
by Ashlee Kieler via Consumerist
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