​Last week, the Obama administration announced another series of initiatives to help students and families manage their student loan debt. The Student Aid Bill of Rights is a proposal intended to address several pain points that some borrowers experience during the life of their loans, and make it easier to get the help they need to resolve those issues.

It’s important to remember that this list of action items is not at all definitive. Some are plans that can and will move forward right away, but others are suggestions for regulatory and legislative changes that may or may not happen. The Student Loan Ranger will try to make it very clear which ones are fact, and which ones are "hope to haves."

Centralized Complaint System

In general, there’s not a lot of love out there for student loan holders​. In some cases, the borrower doesn’t understand the restrictions that student loan laws and regulations put on loan holders. And let’s face it, there are some companies and individuals that are more customer-focused than others in every industry.



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The Department of Education has tried to improve those stats for federally held loans by connecting customer service survey results with student loan volume awarded to its servicers. The servicer that receives the highest scores on the survey gets credit for that in the formula that determines which servicer receives the most volume and, at least hypothetically, additional funds.

In addition to tying contract awards to good customer service, the Department of Education is now tasked with creating a centralized complaint database that borrowers and students will be able to use to log their issues against both loan holders and schools.

The Student Loan Ranger sees this as a step in the right direction, as borrowers should be able to publicly air their grievances so that the system can improve. What isn’t clear yet, though, is whether or not the Department of Education will manage all complaint types or pass along some to be managed by other agencies. The president has ordered the database to go live by July, 1, 2016.

Better Communication Between Loan Holders and Servicers​

The announcement also contained a series of changes intended to help communication between borrowers and their loan holders. These include enhancing disclosures at certain times in the repayment process, including when loans transfer holders, when borrowers fall past due or when a borrower starts but does not complete an application for a repayment plan.



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We hear feedback that many borrowers just don’t open or read their mail from their student loan servicer, so the Student Loan Ranger hopes that some of these changes include features that make these important notices stand out from the rest of the mail.

Currently when a borrower pays more of a loan payment than is required, the extra amount is spread out proportionately among all their loans. Many borrowers trying to pay their loans off early, however, prefer to use the waterfall method, where you pay off the highest interest loan first, and then the next highest, and so on.

The president has tasked the Department of Education with requiring its loan servicers to apply any extra funds to a borrower’s highest interest loan first, unless otherwise instructed by the borrower. It’s unclear when this will be implemented, so borrowers need to keep a close eye on any overpayments they make to ensure they are applied as they expected.

While not as common as in the past, many student loan borrowers still have multiple loan holders, despite all their loans being federal loans. Obama has ordered the Department of Education to create a single portal for borrowers to obtain their loan and payment information. The timing of this endeavor is also unclear, so for now, continue to visit your loan holder’s website directly. If you aren’t sure who that is, you can check online.



Less-Defined Goals​

Other goals within this announcement are slightly more vague or uncertain. The news release discussed working with federal debt collectors to "ensure that they charge borrowers reasonable fees and help them return to good standing."



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As the maximum collection costs are stated in federal law and the Department of Education can already dictate the amount charged, as long as it’s not more than the maximum allowed by law, it’s unclear what this will result in, but the recent termination of several debt collection contracts may be an indication.

There is also discussion of working with the U.S. Treasury Department to allow automatic access to a borrower’s information for the purposes of applying for and renewing income-driven repayment programs. This goal has been in the works for several years, but has not been resolved to date.

Possible Bankruptcy Changes on the Horizon

The president also showed support in this announcement for an examination of current bankruptcy rules as they pertain to student loans. Student loans are not dischargeable in bankruptcy except in extreme circumstances, and this announcement does not change that fact.

What it does do, is signal support for legislative changes that might loosen those rules. According to the administration, the new initiative would clarify the rights of federal student loan borrowers in bankruptcy; simplify the process to verify income and keep borrowers enrolled in income-driven repayment plans; and ensure that disability insurance recipients who can discharge their student loans are not instead seeing their disability payments garnished to repay defaulted loans.