Tens of millions of Americans together owe more than a trillion dollars in student debt. For the financial health of their households and the entire economy, ensuring a fair and smoothly functioning student loan system is critically important.
But with a series of regulatory changes, the Trump administration is taking us in the wrong direction, making student loans riskier, more expensive and more burdensome for borrowers.
First, the Education Department has weakened accountability for the companies that administer student loans. Second, it has made it more difficult for borrowers to apply for, and stay enrolled in, income-based payment plans. Third, Betsy DeVos, the education secretary, has given banks more leeway to charge borrowers high fees — as much as 16 percent of the balance owed — if they fall behind.
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It is puzzling that Ms. DeVos has consistently said that government should be held accountable for the quality of the services it delivers to students, yet the Education Department has in short order made loan companies less accountable to both the government and to borrowers.
This is unfortunate. Dismantling the regulation of loan companies isn’t likely to unleash an innovative, private market that will improve services for borrowers, who have been assigned to a loan company and can’t shift to a better one. There is therefore no market discipline that will drive the bad companies out of business.
Deregulation, in this case, simply leaves borrowers at the mercy of an unaccountable corporate bureaucracy.