For the millennial generation, the greatest economic problem we seem to face has become the almost inescapable student loans necessary to fund our education. With tuition at 4-year colleges continuing to skyrocket and wages for most households continuing to stagnate, loans have become a necessity for many to gain access to higher education.
North Carolina borrowers from the class of 2017 had an average debt of $26,164, with 58 percent of total graduates having some amount of debt. While slightly less than the state average, NC State graduates from the class of 2017 still had an average of $24,053 piled in debt. Even though student loans have proven themselves to be a clear hallmark of the millennial economy, regulation of the market continues to be poor.
A recent report by the oversight arm of the federal government, the Office of the Inspector General (OIG), found that the Department of Education has demonstrated great negligence in regulating student loan companies. The Office of Federal Student Aid is responsible for ensuring that student loan providers act in accordance with their rules. FSA’s incompetence in checking these student loan companies has resulted in significant blows to both loan borrowers and taxpayers who subsidize these companies.
Student loan companies have been driving borrowers into higher-cost plans by failing to show them other payment options. In addition, the OIG found evidence that companies incorrectly calculated monthly payments based on borrowers’ income, resulting in borrowers paying loans at rates that were disproportionate to their monthly earnings.
To add insult to injury, FSA has done almost nothing in punishing these companies for their malfeasance. Despite their mishandling taxpayer money and overcharging desperate borrowers, FSA overlooked the violations. Instead of punishing these reckless companies, FSA disregarded their behavior and assigned them additional loans to manage.
The treatment of these loan providers shows a very evident discrepancy in the consequences they face versus borrowers. These loan servicers were given a slap on the wrist for what is, at best, negligent loan management.
By contrast, when a borrower fails to repay a loan, the consequences can have crippling, long-lasting effects. Defaulting on a loan severely limits your financial freedom by substantially impacting your credit and appearing on your credit report for years to come. Those who default on loans may also lose eligibility for future loan forgiveness or the option to choose repayment plans. Defaulting on private loans can even result in the loan servicer suing the borrower.
The Department of Education owes it to both current and past students affected by these violations to adopt a more encompassing policy of loan forgiveness. There are currently ways to achieve loan forgiveness, but those programs are few and far between. The Department of Education should punish reckless loan providers in a way that also pardons borrowers. An example of this would be implementing negative interest rates for loan providers that violate federal regulations.
Students borrowing loans must remain vigilant of the actions their loan servicers are taking. The current Department of Education has shown who they prioritize in the loan provider-borrower relationship. To ensure that loan providers are no longer able to get away with such improper behavior, students and borrowers still in debt should bring their frustrations to lawmakers in upcoming elections. Borrowers deserve politicians that will represent their interests over those of irresponsible student loan providers.