Taking Action to Help More Americans Manage Student Debt
“I’m only here because this country gave me a chance through education. We are here today because we believe that in America, no hardworking young person should be priced out of a higher education. This country has always made a commitment to put a good education within the reach of young people willing to work for it.”
– President Barack Obama, Remarks on College Affordability, June 9, 2014
Higher education is one of the most important investment individuals can make for themselves and for our country. Today, 11 of the 15 fastest-growing occupations require a postsecondary education. That’s why the President has made historic investments to help millions of Americans afford college by doubling investments in grant and scholarship aid through Pell grants and tax credits, keeping interest rates low on federal student loans, and creating better options to help borrowers manage debt after college like the Pay as You Earn (PAYE) plan.
As detailed in a new post on student debt trends and state-by-state data being released by the Council of Economic Advisers, we are seeing these efforts pay off. More students are graduating college than ever before. More than four of five Direct Loan recipients with loans in repayment are current on their loans. Delinquencies, defaults, and hardship deferments are all trending downward, with nearly three million borrowers successfully accessing a pathway out of default through loan rehabilitation since 2010. And more students are taking action on their student debt when they need support, with nearly five million Direct Loan borrowers taking advantage of repayment options like the President’s PAYE plan, which caps monthly student loan payments at 10 percent of income, up from 700,000 enrolled in 2011.
Many students access student loans to help finance their education; typically, that investment pays off, with bachelor’s degree recipients earning $1 million more in their lifetime and associate’s degree recipients earning $360,000 more, compared to their high school counterparts. But for some, burdensome student loan debt can present a challenge as they seek to start a career, raise a family, purchase a home, start a business, or save for retirement.
Guaranteeing strong consumer protections and building a system of high-quality customer service are important components of a federal student loan system that expands college opportunity and provides reassurance to American families that pursuing a college degree and responsibly borrowing to pay for college will not threaten their future financial security.
Today, the White House is announcing new actions and highlighting the progress already made to help ensure the more than 40 million Americans with student loan debt understand their repayment options and access high-quality customer service, strong consumer protections, and targeted support to repay their student debt successfully.
New Actions on Student Debt
Over the past few years, the Administration has stepped up efforts to ensure that flexible repayment options are available to support Americans with federal student debt. Today’s actions build on that progress and provide a roadmap to guide and support borrowers as they seek to manage and repay their debt successfully:
· New Goal to Enroll 2 million More Borrowers in Plans like Pay As You Earn (PAYE). The President’s PAYE and related income-driven repayment plans are available to help borrowers who may be struggling to manage their debt effectively. Yet, too many borrowers still do not know about this important option. Leveraging key improvements in loan servicing and customer service, better tools and resources, targeted outreach to borrowers, and partnerships with key external organizations under the Student Debt Challenge, the Administration is announcing a new goal to enroll two million more borrowers in plans like PAYE by this time next year.
· Launch of StudentLoans.gov/Repay. To help borrowers easily navigate the complexity of student loan repayment options, the U.S. Digital Service and the Department of Education’s Office of Federal Student Aid have launched StudentLoans.gov/Repay to help drive students to their best repayment option in five steps or less. Built mobile-first, and using human-centered design, StudentLoans.gov/Repay was designed to make repayment information as easy to understand as possible.
· Strengthening Consumer Protections through New Standards for Student Loan Servicing. The Department of Education and Department of the Treasury - after consulting with the Consumer Financial Protection Bureau (CFPB) and their work with Illinois Attorney General Lisa Madigan and other state attorneys’ general - have developed clear student loan borrower rights and protections in three key areas: (1) providing accurate and actionable information about account features, borrower protections, and loan terms; (2) establishing a clear set of expectations for minimum requirements for communication and services provided by student loan servicers, including adequate and timely customer service; and (3) holding servicers accountable for fixing errors, being responsive to borrowers, and resolving problems by ensuring that borrowers, federal and state agencies and regulators, and law enforcement officials have access to appropriate channels of recourse when violations of federal or state consumer financial laws occur. The Department of Education will ensure all borrowers with federal Direct Loans can rely on high-quality service in line with these standards and protections. The Department of Education will implement this effort as part of its new vision for servicing student loans.
· Better Information to Help Borrowers Take Action on their Debt: CFPB Prototype Student Loan Payback Playbook. The CFPB is seeking comment on a new set of student loan servicing disclosures—a student loanPayback Playbook – that provides borrowers personalized information to better understand their repayment options and find a monthly payment they can afford. To help borrowers choose the best repayment plan with the most up-to-date information based on their circumstances, borrowers would see a plain language Playbook on their monthly bill, in regular email communications from their student loan servicer, or when they log into their student loan account. The Department of Education, working with the CFPB, will be finalizing and implementing these disclosures for federal loans borrowers.
· Ensuring Effective Student Loan Counseling. The Department of Education will work to improve the timing and content of current loan counseling efforts, including statutorily required entrance and exit counseling, to help students make better borrowing decisions, increase college completion, promote successful loan repayment, and reduce delinquencies and defaults. Specifically, the Department will upgrade and redesign its Entrance and Exit Counseling tools on StudentLoans.gov – which serves 6.5 million students a year – based on user analytics and direct input from more than 500 borrowers, financial aid administrators, policymakers, and higher education organizations. The Department is also developing a loan counseling experiment to rigorously evaluate the effectiveness of different counseling tools and the impact of offering borrowers more frequent information and guidance beyond the statutorily required one-time entrance and one-time exit counseling.
· Leveraging Research to Drive Better Student Outcomes. The Department of Education will pilot Advancing Insights through Data (AID), a research partnership program that will offer other federal agencies and affiliated researchers data access to conduct research that can inform and advance policies and practices that support students’ postsecondary success and strengthen repayment outcomes for borrowers. Starting with Federal Reserve Board researchers this fall, the program will allow experts to apply to securely access and match administrative student aid data files with other survey and administrative data, while ensuring safeguards are in place to protect the privacy of students and families. AID builds on the Administration’s recent efforts to leverage government data in ways that can improve service delivery, promote transparency, and strengthen accountability, particularly through the College Scorecard, which includes the most comprehensive, reliable data ever published on students’ post-college earnings and repayment outcomes. The Department is also exploring future opportunities for new research partnerships.
· Modernizing Credit Reporting for Student Loans To Ensure Fair Treatment Of Borrowers. The Department of Education and the Department of the Treasury, in consultation with the CFPB, are working collaboratively with the credit reporting industry to develop guidance for servicers, lenders, and others who furnish data to the credit bureaus to determine how best to report student loan data so that it is fair, consistent, and accurately reflects repayment activity. This effort is another critical part of the Department’s new vision for servicing student loans.
· Over 40 new student debt challenge takers. Earlier this month, the White House issued a call to action for colleges, universities, non-profits, businesses, state and local governments, and other employers to help more borrowers better understand their options, and to take action to enroll those borrowers in PAYE and related plans so they can manage their monthly payments and avoid delinquency and default. Today, we are highlighting a growing list of commitments from organizations working to inform their employees and members about PAYE and related plans, train human resources (HR) staff on the importance of helping borrowers understand their student loan repayment options and the steps individuals must take to enroll, and use digital platforms to highlight PAYE and related plans. In the few short weeks since the Debt Challenge was launched, there have been over 40 commitment makers, and we are encouraging more colleges, businesses, non-profits to take action. As of April 26, the list of commitments includes:
o ACCESS College Foundation
o AFSCME
o Achieving the Dream
o American Student Assistance
o American Sustainable Business Council
o California State University, Long Beach
o California Association of Nonprofits
o The Century Foundation
o College Advising Corps
o College Forward
o College Greenlight
o Dyersburg State Community College
o Florida International University
o Friendship Public Charter School
o Indiana University
o Iowa State University
o Jobs for the Future
o Lake Area Technical Institute
o Lone Star College
o Marcus Foster Education Institute
o Marks and Associates
o Montana State University Bozeman
o Morgan State University
o National Housing Resource Center
o Natixis Global Asset Management
o New Haven Promise
o Operation HOPE, Inc.
o Parkway School District
o Pharr-San Juan-Alamo Independent School District
o Rutgers University - Newark
o Tennessee Technological University
o University of Pittsburgh
o University of Memphis
o University of South Carolina School of Medicine Greenville
o The Institute for College Access and Success
o The State University of New York
o University of Michigan - Ann Arbor
o University of Northern Iowa
o United Tribes Technical College
o Valencia College
o Young Invincibles
In addition, several organizations are committing to take additional action:
· Civic Nation, in partnership with the digital agency, HUGE, has expanded their Up Next guidance and reminder tool to include information about income driven repayment options. Up Next will send text notifications to individuals who sign up to remind them about their loan repayment options and to provide guidance on how to sign up for different repayment plans.
· College Forward will coach 6,000 plus motivated, underserved students to achieve the benefits of higher education and a college degree. They will educate the students they serve about the benefits of loan repayment options like PAYE and refer them to the resources available at financialaidtoolkit.ed.gov. College Forward will also recruit 80 plus recent college graduates through the AmeriCorps program to serve as mentors within their program.
· Fidelity Investments has taken action to support employees with student debt and is piloting new solutions to better educate and empower student borrowers. This January, Fidelity Investments® announced a new employee benefit called the Step Ahead Student Loan assistance program, which provides eligible employees with more than six months of tenure $2,000 dollars per year toward their student loans (up to $10,000 dollars) and since its launch has enrolled 5,000 Fidelity associates who are receiving payments – saving a total of $1.5 million in interest and principal in the first month alone. Building on this work, Fidelity will pilot programs to better educate borrowers by aggregating all their loans in one place, show the best strategies to pay them down; educate borrowers on various repayment options including PSLF (Public Service Loan Forgiveness); and frame student loans in the context of other financial priorities, such as retirement.
· Houston Community College (HCC) will use its team of financial coaches to hold workshops and one-on-one financial coaching sessions for current students and borrowers who have completed or left college to assist them with understanding student loan repayment options and help guide the students with taking advantage of the repayment options such as PAYE. HCC will also work to support student loan repayment on campus and in the local community through outreach to employees, parents, and community members.
· National Housing Resource Center (NHRC) will train 500 housing counselors to help student loan borrowers qualify for income-driven repayment plans, by conducting a national training program for nonprofit housing counselors. The housing counselors will be able to work with their prepurchase, loss mitigation, and financial assistance clients and help them identify the appropriate plan.
· Nerd Wallet pledges to promote the use of income-driven repayment options when appropriate to the three million consumers that use their website monthly to make and manage financial decisions. Through easy-to-follow articles and free tools, NerdWallet breaks downs the basics of the plans, who they're best for and how to enroll in them to ease the burden of student loan debt.
· Rite Aid commits to inform and assist their 90,000 associates, including 12,000 pharmacists, with strong financial planning support, including ensuring awareness of programs, like Pay-As-You-Earn (PAYE). Rite Aid will inform their employees of their ability to enroll in PAYE through their pay stubs twice a year, link to the PAYE website on their internal communications portal where their associates can access information about the program, and include messaging about financial assistance programs, like PAYE, in their company’s human resources newsletters and communications.
· Student Debt Crisis will continue their student loan education by conducting student loan trainings for more than 2,000 professionals through the National Housing Resource Center. They will also work with CalNonprofits to help them build out a student debt program educating between 400 and 1,000 nonprofit professionals about repayment options and public service loan forgiveness who can help spread the word. Student Debt Crisis plans to conduct a series of webinars to reach more than 800,000 people within their membership network.
· The Center for American Progress, working in partnership with Generation Progress and Higher Ed, Not Debt, has educated their employees about the benefits of these programs for the last two years. As part of the challenge they will educate, engage, and mobilize Americans – including their own employees – around the issue of income-driven repayment plans, beginning on $1T Day, the national day which marks student debt surpassing one trillion dollars. These efforts will include social media chats and in-person events, starting with a D.C. event with policy experts. Additionally, CAP, GP, and HEND will work with partner organizations to host webinars and workshops. Altogether, these efforts can reach 5,000 people.
· The Institute for College Access and Success (TICAS) will contact the more than 100,000 subscribers to their website, share information with their social media networks to remind them about income-driven repayment plans and encourage them to help spread the word to others.
· The State University of New York has committed to spreading the word to their nearly 1.4 million students and employees about income driven repayment options through regular information sharing, debt management counseling for at risk students, and through their new SUNY Re-Enroll to Complete program which encourages recently withdrawn students to return and finish their degrees.
· The University of California commits to regularly informing its more than 246,000 students and 200,000 faculty and staff about income driven repayment options and public service loan forgiveness through its regular contacts, as well as by sending additional information to the main campus alumni relations offices, student services staff, and the system’s human resources professionals.
· YI Advisors, the social impact arm of Young Invincibles, commits to piloting a new technology platform to help students and borrowers 1) better understand their student loan debt; 2) compare government repayment options including PAYE, and other plans; 3) get reminders about recertification and application deadlines; and 4) get help enrolling in PAYE and other income-driven repayment plans and programs like Public Service Loan Forgiveness that are currently under-utilized. They will work with a range of partners (from schools to non-profits to private sector) to distribute and pilot the student loan education platform with borrowers and identify areas for improvement.
In the coming weeks and months, the White House will continue to encourage organizations to take the Student Debt Challenge, and will announce additional challenge-takers. New Federal Commitments to Tackle Student Debt include:
· The Corporation for National and Community Service (CNCS) will share information with current AmeriCorps members, AmeriCorps alums, and grantees about income-based repayment options, such PAYE. CNCS will also ensure that more members and grantees have information about other ways to reduce their student loan burden, including Public Service Loan Forgiveness. CNCS will also continue to encourage colleges and universities to match the Segal AmeriCorps Education Award that members receive at the end of their term of service. This year, approximately 75,000 AmeriCorps members are serving with thousands of organizations across the country, and more than 980,000 AmeriCorps members have served over the last 20 years. Since the inception of AmeriCorps in 1994, AmeriCorps members have earned more than $3.1 billion in education awards to pursue further education or pay off their student debt. In addition, CNCS has made more than $93 million in interest forbearance payments covering the interest cost of students loans for AmeriCorps members during their terms of service.
· Honoring Our Federal Workforce. The US Office of Personnel Management (OPM) will coordinate an interagency effort to provide the federal workforce access to the information necessary to use one of the four income-based student loan programs and Public Service Loan Forgiveness options in order to reduce their family’s student loan debt. Through the remainder of the Administration, OPM will collaborate with human capital professionals and senior leaders across agencies to develop effective strategies for communicating the options available to the federal workforce. These strategies will be woven through OPM’s existing efforts to encourage and advance Hiring Excellence and enhance employee engagement in order to recruit and retain a first class federal workforce.
· Streamlining Systems So More Students Can Access Financial Aid Resources. The United States Digital Service (USDS), working with the U.S. Department of Education Federal Student Aid Office (FSA) will review and streamline the process of creating an FSA ID – which is the new financial aid username and password – so students can complete the FAFSAs and so borrowers can log to manage their student loans, through a more secure and protected system. USDS and FSA will also simplify the income-driven repayment plan application process so that it is simple for borrowers to enroll to manage their debt using an income-driven repayment plan. Part of this work will be to establish a centralized point of access for all federal student loan borrowers, starting with the needs of the borrower. Finally, USDS and FSA will digitize the process of applying for Public Service Loan Forgiveness so that teachers, firefighters, people serving their communities through non-profits, and others who are eligible for Public Service Loan Forgiveness do not struggle with paper processes to have their loans forgiven.
Building on a Record of Progress
Americans with student loan debt deserve high-quality customer service and the consumer protections necessary to ensure they can effectively take action on their student debt. Over the past few years the Administration has stepped up efforts to ensure that there are options available to support Americans who may be struggling with student loan debt.
· Making College More Affordable and Keeping Student Debt Manageable. Since the President took office, the Administration has increased the maximum Pell award by over $1,000, and for the first time, tied aid to inflation to maintain its value. These efforts have cut the cost of college by about $3,700 on average for over eight million students last year. This Administration also established the American Opportunity Tax Credit (AOTC), which provides up to $10,000 over four years of college, which will help nearly 10 million families cover the costs of tuition and other educational expenses, saving on average $1,800 in 2016. To ensure student loans are manageable, the Administration has cut student loan interest rates, saving a typical student $1,000 over the life of loans borrowed this year, and began implementing the Student Aid Bill of Rights to strengthen loan servicing and make it easier for students to access the information they need to choose repayment plans. Meanwhile, defaults, delinquencies, and forbearances are trending downwards.
- Accomplishments on the Student Aid Bill of Rights. Since the President’s announcement of the Student Aid Bill of Rights in March 2015, the Department of Education, in collaboration with other federal agencies, has worked to:
- Identify Best Practices in Performance-Based Contracting including identifying a strong performance-based compensation structure focused on supporting borrowers with the greatest risk of default; setting performance metrics and allocation methodology to drive strong borrower outcomes; requiring standardized service-level minimums including standardized communications focused on risky borrowers; creating robust borrower protection and complaint resolution processes to ensure strong accountability; and establishing strong oversight processes and enforcement mechanisms including penalties for noncompliance or contract violations.
- Protect Social Security Benefits for Borrowers with Disabilities through a new process to proactively identify and assist federal student loan borrowers with disabilities who may be eligible for Total and Permanent Disability (TPD) loan discharge. Approximately 387,000 borrowers were positively identified in the first set of matches, which were conducted in December 2015 and March 2016. In total, these borrowers have a combined loan balance of over $7.7 billion, and roughly 179,000 are currently in default. As required by federal law, over 100,000 of those borrowers with defaulted loans have been certified for the Treasury Offset Program, and are therefore at risk of losing federal tax refunds, and of having their Social Security benefits offset. This month, borrowers who were positively identified in the match will receive a customized letter explaining that the borrower is eligible for loan forgiveness and the simple steps needed to receive a discharge. Unlike other borrowers, those identified through the data match will not be required to submit additional documentation of their eligibility. Instead, they are eligible for a streamlined process by which they simply sign and return the completed application.
- Identify Best Practices in Performance-Based Contracting including identifying a strong performance-based compensation structure focused on supporting borrowers with the greatest risk of default; setting performance metrics and allocation methodology to drive strong borrower outcomes; requiring standardized service-level minimums including standardized communications focused on risky borrowers; creating robust borrower protection and complaint resolution processes to ensure strong accountability; and establishing strong oversight processes and enforcement mechanisms including penalties for noncompliance or contract violations.
o Find New and Better Ways to Communicate With Borrowers by conducting five pilots to test the most effective ways to share information about loan repayment options with borrowers. These pilots reached over four million borrowers this past year and will reach an additional three million by the end of the summer. The Department of Education collaborated with the White House Social and Behavioral Sciences Team to utilize research and behavioral insights about how borrowers consume information, consider their options, and make decisions about repayment. Randomized-controlled trials were used to test the effects of how choices are framed and the importance of personalized information. These insights are being used to inform a new repayment campaign to reach over a million borrowers in their grace period that are about to enter repayment. Building on these successful pilots, the Department of Education is making plans to standardize communications about loan servicing so that information received is accurate, personalized and consistent, ensuring that borrowers receive the information that they need to successfully repay their loans.
- Create a Responsive Student Feedback System to give students and borrowers a simple and straightforward way to file complaints and provide feedback about federal loan lenders, servicers, collections agencies, and institutions of higher education. Beginning on July 1, 2016, the Enterprise Complaint System (ECS) will enable customers to submit complaints, positive feedback, and allegations of suspicious activity regarding their Federal aid experience directly to the Department of Education and receive responsive, meaningful resolutions. Customers will be able to view, track, and manage their cases through an easy-to-use online portal or by calling a dedicated support center. In addition, the data collected by the Department will be analyzed and used to drive enhancements to internal student aid operations and inform policy discussion on relevant topics.
- Strengthen the Student Loan System to Better Protect All Borrowers through a report released last October, in consultation with the Department of the Treasury and CFPB, the report outlined a series of statutory, regulatory and administrative recommendations to safeguard student borrowers including calling on Congress to simplify income-driven repayment plans; ensuring service members don’t lose their interest rate protections under the Servicemember Civil Relief Act when consolidating their loans; strengthening protections against predatory third parties that charge borrowers exorbitant fees for services that are available for free at studentaid.gov and enhancing federal data-sharing to improve borrower experiences and simplify the application process for borrowers’ to re-certify eligibility for income-driven repayment over multiple years.
