March 28, 2017

Dept Ed Removal Of Obama Protections Against Usurious Student Loan Rates Will Bite Trump

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If President Trump wants to be a one term president he just took a major step in that direction through the actions of his Secretary of Education, Betsy Devos. The widespread impact of her announced decision will be felt throughout the ranks of a particularly active political demographic, young people, student age, the liberal leaning youth of America. They are the ones who overwhelmingly made an old communist their candidate of choice and who, if they had been allowed to have him as a nominee, had a fervent enough base of support to have possibly defeated President Trump.

On Thursday the Education Department wrote in a Dear Colleague Letter that a previous letter from the Obama regime was no longer in force. That letter had prevented debt collectors from charging high interest, usurious rates on delinquent student loans. In 2015, Obama prevented collectors from charging fees as high as 16 percent of the principal and accrued interest if the borrower entered the government’s loan rehabilitation program within 60 days of the default.

More explanation and review of the decision was not offered. With the policy change impacting a reported 7 million people, it may not only be an unwise move to make, it may prove to be a politically disastrous one. In a country as evenly divided as this one, an election can be tipped by a relatively small change in the mood of the public. Trump’s got more than enough fights underway with various segments of the population; this is one that he didn’t need. If he’s convinced that he can turn the economy around, these debtors will eventually find their ways into the resulting jobs. Allowing bill collectors to charge what amounts to crippling compound interest on their debts is not only bad policy, it’s wrong.

Lynn Mahaffie, Acting Assistant Secretary, wrote, “The department will not require compliance with the interpretations set forth in the DCL [original Dear Colleague Letter] without providing prior notice and an opportunity for public comment on the issues.”

The Obama regime issued the memo in 2015 after a Circuit Court of Appeals sought guidance in a case filed against United Student Aid Funds contesting the legality of the penalties. After stating that they thought the Obama letter “would have benefited from public input on the issues discussed,” the Trump administration rescinded the accommodations it afforded 7 million likely voters without any public input.

An interest penalty of sixteen percent amounts to an income tax on the failure to produce an income, one that is then factored into future calculations in a growing snowball of debt. That big government financial bludgeoning will surely motivate those affected to vote relief for themselves in the only form they can, the Trump opposition candidate.

One potential opposition candidate for 2020, Sen. Elizabeth Warren (D-MA), was joined by Rep. Suzanne Bonamici (D-OR) in sending a letter urging the Department of Education to continue to recognize the Obama guidelines.

They wrote, “Congress gave borrowers in default on their federal student loans the one-time opportunity to rehabilitate their loans out of default and re-enter repayment. It is inconsistent with the goal of rehabilitation to return borrowers to repayment with such large fees added.” Even a blind squirrel gets an acorn once in a while and Warren just bit into hers.

Last week, the Consumer Federation of America reported that student loan defaults for those who had not made a payment on their loans for at least nine months in 2016 had risen 14 percent. The average amount owed is $30,650 per federal student loan borrower, which is a 17 percent increase since 2013. The situation is not the result of America being a land of deadbeats. It’s reflective of what has been taking place in this country for the last thirty or forty years. It’s because we’ve been robbed of our economic engine and opportunities by the same government that is now putting the screws to those who went into debt to finance their upward mobility and found none.

This is a bad decision and one that will be reversed, either by the Trump administration, a much more preferable option or by the voters in 2020. The reality is what it is and President Trump does not benefit by giving the opposition a unifying issue like this, particularly when he’s under fire from so many different directions.

 

 

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