Betsy DeVos Rolls Back Obama-Era Guidelines On Student Debt Collection

04/13/2017 10:26


Education Secretary Betsy DeVos on Tuesday rescinded a pair of Obama-era policies that aimed to reform how the government collects student loan debt, citing inconsistencies with the approach.

The Obama administration issued two memorandums in 2016 that directed student loan debt collectors to focus more on assisting borrowers with managing their debt, rather than maximizing their net collections.  The move was intended to improve how the government collects the almost $1.1 trillion of outstanding government-owned student loans, a process the U.S. Consumer Financial Protection Bureau in 2015 said was marred by “widespread failures.”

During Obama’s eight years in office, 8.7 million Americans defaulted on student loans. This happened with the government spending $800 million annually to collect student debt.


The Obama administration’s effort to “strengthen consumer protections” left too many questions unanswered, and prompted the National Council of Higher Education Resources to ask Congress in a pair of April 4 letters to delay the implementation of the changes.

DeVos responded to their request by withdrawing the Obama-era memorandums Tuesday in an effort to “negate any impediment, ambiguity or inconsistency” in the government’s approach to collecting student loan debt.  “We have a duty to do right by both borrowers and taxpayers,” DeVos wrote.
“The student loan servicing procurement affords us a significant opportunity to improve outcomes and experiences for federal student loan borrowers, as well as demonstrate sound fiscal stewardship of public dollars,” she explained.  “We must create a student loan servicing environment that provides the highest quality customer service and increases accountability and transparency for all borrowers, while also limiting the cost to taxpayers.”

DeVos didn’t elaborate on how exactly Obama’s approach fell short, which provoked criticism from the officials that drafted the policies.


Former Deputy Treasury Secretary Sarah Bloom Raskin, who helped create Obama’s student loan collection policies, chided DeVos for reversing her work “with no coherent explanation or substitute.”

Raskin accused the Trump administration for prioritizing the needs of debt collectors over the borrowers hampered with debilitating student debt.  The reversal has many advocates concerned, especially with no replacement policy on the horizon.


“There’s a lot of problems out there and these basic common sense protections are incredibly necessary,” said Persis Yu, director of the Student Loan Borrower Assistance Project at the National Consumer Law Center. “It’s somewhat baffling to see them being rolled back at this point.”