Support Student Borrowers’ Rights

Federal Student Loan Consumers Are Entitled to Comprehensive Debt Management

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• What is Education Debt Management?
• Why Education Debt Management Should Be an Entitlement
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Student Loans 101

Historically, students in the United States have been assigned to 1 of 2 federal student loan systems—the Federal Family Education Loan Program (FFELP), which is funded through a partnership between private student loan service providers and the government, and Direct Lending, which is wholly government funded. Whether a student’s loan comes through FFELP or DL is dictated by the college’s choice of program—not by the student.

From a borrower’s perspective, the 2 programs are nearly identical in interest rates, terms, and repayment options and funds are disbursed directly to the school, regardless of the source. Where the programs differ is the level of support offered to borrowers. Borrowers need neutral, full-service counseling and guidance to help them make wise borrowing decisions and avoid default. Financial aid officers do their best to provide some degree of assistance, but they are under considerable demands to meet the needs of hundreds of students and alumni. Student loan lenders (or their hired servicers) are required by federal regulations to reach out to borrowers who have fallen behind on their payment and bring the accounts current, but these efforts often are not enough and only occur once payment problems have already begun. Guarantors provide high-quality, tailored debt management and financial literacy services, but not universally: Students participating in the Direct Lending program have no access to guarantor-provided financial literacy services at all.

President Obama’s proposed federal budget for 2010 recommends moving all loans to the Direct Loan Program (DL) model. The House Education and Labor Committee has passed H.R. 3221, the Student Aid and Fiscal Responsibility Act (SAFRA). However, the bill does not include a specific provision that would entitle all federal student loan borrowers to free debt management counseling as proposed by American Student Assistance (pdf, 208 KB). Without such a provision, proven default-prevention and support services for borrowers could become a thing of the past.

The bill moves next to the full House for a floor vote. It is unclear at this time whether the Senate will introduce its own reform legislation and whether or not budget reconciliation (the process whereby the bill can pass the Senate with a simple majority of 51 votes) will be employed. To keep up with the latest developments, bookmark our Recent News page.

Loans Get Students Through College. Support Reform that Gets Them Through Their Loans.