We have tried for years to persuade the Department of Education to improve policies and programs for financially distressed student loan borrowers. We hoped the new Administration would act quickly to resolve festering problems. So far, unfortunately, the current Administration has responded mostly with talk, very little action.
We began our renewed efforts in February 2009 soon after the new Administration came into office. We sent a letter to Secretary Duncan outlining a number of operational problems that we thought would be fairly easy to resolve. Here are a number of key issues we raised and the responses so far:
1. Improve Information to Direct Loan Borrowers Selecting ICR and IBR
We wrote earlier about this issue. Among other improvements, we recommended that the Department change the letter sent to borrowers applying for consolidation. Our recommended changes would help borrowers applying for IBR or ICR to understand that they do not have to make interest-only payments if they cannot afford them while the IBR or ICR payment amount is being calculated. The Department agreed to review this letter. Since then, however, the Department set up a new servicer contract system and they tell us that they cannot tell the new servicers which letters they must use. Our experience so far is that borrowers applying for ICR or IBR are still confused by initial letters that state an unaffordable payment amount. To make matters worse, as described below, most of these borrowers cannot even access IBR. (see #2 below).
2. Ensure that Borrowers Consolidating as A Way out of Default Can select IBR
The regulations allow these borrowers to select IBR and the Department has added IBR as an option on the repayment plan selection form. However, Department staff tells us that they have not figured out how to ensure that borrowers consolidating out of default can actually get into IBR. At this point, the Department says that these borrowers will be placed in ICR and will later have to switch to IBR. (This is despite the regulations which say that the borrowers have a right to select ICR or IBR). They also say that borrowers seeking to switch from ICR to IBR will first have to make three payments. We have asked for clarification, but have yet to hear back.
3. Collection Agency Complaint Process
We asked for clarification of the escalation process when borrowers have trouble with collection agencies. This is the information the Department gave us (see complaints about private collection agencies). Yet we continue to hear complaints from borrowers trying to resolve problems with collection agencies. Please let us know about your experiences.
4. Disability Discharge Process
We have documented the problems with the disability discharge process for years. More recently, a federal district court concluded that the Department’s administration of this program violated borrower constitutional due process rights. We keep hearing that the Department is planning to make improvements, but we have yet to see these changes. We are told that the internal review of this process is not public. The Department has not asked us (or as far as we know other borrower advocates) for input on new forms or new processes. How can they get a complete picture without checking in with borrowers and their advocates??
5. Communication with Attorneys
We have an ongoing problem with respect to the Department’s varying policies about communicating with attorneys representing borrowers. We understand the Department’s need to get releases from borrowers. The problem is the lack of a standardized process. All other federal agencies, as far we know, have figured out a way to handle this issue and therefore respect a borrower’s right to legal counsel. The Department of Education has stonewalled on this issue.
We sent a follow-up letter to Secretary Duncan in August 2009 summarizing these issues. Since then, we have also met with Department staff to discuss the problems with loan rehabilitation. The Department has yet to exercise authority given by Congress in 2009 to address problems with sale of rehabilitated loans. They have told us that they are developing a possible solution for the problems faced by borrows making low payments during rehabilitation, but we have yet to hear anything definite. (a lot of talk, very little action).
More recently, we wrote to the Office of General Counsel describing inaccuracies and other problems with the Department’s 2009 manual for private collection agencies. We also wrote to Secretary Duncan asking for a meeting to outline the problems low-income borrowers are having with rehabilitation. His office wrote back and said he could not meet with us. The Office of General Counsel responded to tell us that they refered our letter to the Office of Postsecondary Education. No response yet from them.
In the meantime, after news stories and blogs describing problems with the collection agency manual came out, the Department apparently took the PCA contractor site off-line. This is shocking given that the Department has allowed public access to this site for years (throughout the past Administration for example). So much for transparency in government. The answer in this case, it seems, is not to do something about the problems, but to make the public less able to find out about them.
We will post future developments on these issues as we get them.