One of Betsy DeVos' ten yachts was unmoored in Lake Erie last week.
I have a hard time believing Ed. Secretary Betsy DeVos has much empathy for the so-called “little guy”. While families are losing everything they own in this world to wild fires in California, and people are being evacuated from their homes in Pennsylvania due to flooding, Ms. DeVos’ main headache at the moment is someone unmooring her $40 million yacht last week from its dock on Lake Erie. Not that I begrudge anyone success, but it would make me feel a bit more charitable if DeVos’ policies were geared more to helping those at the lower end of the income scale. For former Obama Ed. Secretary Arne Duncan the yacht fiasco was a perfect metaphor for the department’s policies under DeVos – adrift. "For me that sort of represents where they are in terms of education policy," Duncan said. "There isn’t one. The policy is adrift. There's nothing out there of substance."
I personally don’t think “adrift” is an accurate description. It seems to me DeVos knows precisely what she’s doing, and not all of it is good. Two weeks ago in a blog entitled, “Look for the helpers”, I wrote about how recent reversals in Obama-era protections for students are de rigueur at the department. This week we’ll take a closer look at what’s going on with student loans.
Last month DeVos announced a proposal due to go into effect in 2019 that would reverse Obama administration policies which made it easier for students to get loan forgiveness on debt incurred from enrollment at for-profit colleges that knowingly deceived and mislead attendees with false advertising. The new proposal would leave student borrowers without protection by changing debt relief rules.
Under the “borrower defense to repayment” statute, students were given an easier way to file for debt relief from for-profit schools that engaged in predatory practices like touting unrealistic claims on job prospects after graduation. DeVos’ new policy will make it more difficult for borrowers to file such claims. The burden will fall on students to prove that the school intentionally defrauded them. Another option would be to go into default before being allowed to file for loan forgiveness. The proposal also eliminates a ban on mandatory arbitration clauses, which allowed students to take a school to court. Even worse, students will no longer be able to make group filings and would have to file individually.
Another change that has happened under DeVos is that unlike the Obama administration, which fully forgave the debts, the Trump administration has only been granting partial forgiveness. Forgiveness of debt is being based on how much a graduate earns in comparison to others in similar jobs. If it’s less than 50% then their debt is fully forgiven.
“All these things together add up to a rule that is shifting the liability for bad actions from bad actor schools to students,” says Clare McCann, former senior Education Department policy adviser under Obama. “It seems to be about letting schools off the hook for their actions and leaving students to shoulder the debt.”
Some other changes that have occurred:
Death and Disability Student Loan Discharge *
Under the Trump tax plan tax liability will be eliminated on student loans discharged due to death or disability. This went into effect in January of 2018. This change seems to be a fair one but is set to expire in 2025.
Tuition and Fees Deduction
This deduction has been eliminated under the Trump tax plan. Previously it allowed borrowers to reduce taxable income by up to $4,000.
More proposed changes:
Eliminating Public Service Loan Forgiveness (PSLF)
PSLF is one of the number one ways to currently get loan forgiveness. This program grants loan forgiveness after ten years if the borrower has worked in a public sector job, such as with a state or federal agency or a not-for-profit organization. Trump called for defunding this program in his 2018 budget. He is bringing it up again for 2019.
Subsidized Student Loans
These loans go to students with financial need. In addition, under these loans the government pays the interest accrued while the student is in school. If the administration eliminates these loans it will be more expensive for those with financial need to borrow.
Income-Driven Repayment Plan
The administration wants to move to a single income-driven repayment plan as opposed to several plans that exist now. Monthly payments would be capped at 12.5% of income. Student loan forgiveness would happen after 15 years for undergrads and 30 years for graduate students. This proposal has pluses and minuses. For some borrowers 12.5% would be an increase, and the 30 year term is also longer than it is currently. For others 12.5% would be more favorable and the 15 year term could benefit undergraduates.
After 1998 student loans could not be discharged in bankruptcy unless undue hardship was evident. In many cases, undue hardship is difficult to prove. DeVos’ Ed. Department is looking to define undue hardship. The change could help some people, but it could also make loans more expensive.
The Trump tax plan originally would have eliminated the student loan interest deduction. The deduction stayed in the final version. The jury is still out on whether this deduction is beneficial or simply costs tax payers money.
Almost 45 million Americans have student loan debt totalling almost $1.5 trillion. To them and their families this is not a trivial matter. America's students would be well-served if Betsy DeVos would get her bearings and set student loan policies on a straight course.
*Source material: The College Invester: Trump Student Loan Forgiveness Changes and Proposals. July 23, 2018
posted by Amy Levengood
Paul Eaken, contributor