A 16 per­cent out­rage: Pay­ing off stu­dent debt is hard enough

Rome News-Tribune - - EDITORIALS AND OPINION - From the Pitts­burgh Post-Gazette

Pres­i­dent Barack Obama’s Ed­u­ca­tion Depart­ment said de­fault­ing bor­row­ers who quickly got their fed­er­ally guar­an­teed stu­dent loans back on track couldn’t be slammed with a 16 per­cent col­lec­tion fee. Last month, Pres­i­dent Don­ald Trump’s Ed­u­ca­tion Depart­ment said: Never mind.

It thus of­fered a wind­fall to the pri­vate com­pa­nies that get to help run this gov­ern­ment pro­gram. But it added to the bur­den of strug­gling bor­row­ers.

The Obama ad­min­is­tra­tion set out its rule in a “Dear Col­league” let­ter in 2015. So, un­like a for­mal reg­u­la­tion, the rule didn’t have to be of­fered for pub­lic com­ment be­fore it was is­sued. And that, the Trump ad­min­is­tra­tion said in the “Dear Col­league” let­ter re­scind­ing the rule, was the prob­lem: The rule “would have ben­e­fited from pub­lic in­put.”

Im­por­tant reg­u­la­tions should go through the for­mal reg­u­la­tory process. The pub­lic should be able to com­ment. But if the new ad­min­is­tra­tion’s only com­plaint about this fee was pro­ce­dural, it should have said it was launch­ing the for­mal process to re-is­sue the rule.

The pub­lic cer­tainly com­mented when the rule was with­drawn. The com­ments were in­for­mal, but clear and pow­er­ful: The with­drawal of the rule gen­er­ated so much out­cry that the com­pa­nies that are now al­lowed to charge the fee — known as guar­an­tee agen­cies — quickly an­nounced they won’t ac­tu­ally charge it.

That out­cry was jus­ti­fied. This fee is in­hu­mane: The peo­ple sub­ject to it are al­ready strug­gling with debt. Mak­ing the debt larger makes their prob­lem worse.

The law gives de­fault­ing bor­row­ers one shot to re­ha­bil­i­tate their loans — and even ar­range pay­ment terms based on their in­come. The point of that is to let them fix the mis­take they made by de­fault­ing. It de­feats the pur­pose to add a huge sur­charge.

There’s no good rea­son to let the agen­cies charge so much. Col­lect­ing from peo­ple who quickly en­ter re­pay­ment agree­ments and keep them is not dif­fi­cult or ex­pen­sive. And there’s no free-mar­ket ar­gu­ment here: This isn’t a pri­vate con­tract; it’s a gov­ern­ment pro­gram 26 com­pa­nies are al­lowed to make money on. The ques­tion isn’t why reg­u­late — it’s why not have the gov­ern­ment take over the whole mess.

The Trump ad­min­is­tra­tion in­vited gov­ern­ment con­trac­tors to try to squeeze even more money out of peo­ple who were al­ready hav­ing trou­ble pay­ing what they owe. This is un­con­scionable.

IMike Lester, Wash­ing­ton Post Writ­ers Group

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