Student Loan News, Week In Review

Published on Author Kelsey Radcliffe

This week in student loan news: the U.S. Department of Education released its quarterly report on the federal student loan portfolio, ITT tech loses all federal student aid and funding, and the recently-announced Amazon/Wells Fargo student loan program dissolves.

How we’re managing federal student loan debt

The U.S. Department of Education released its latest quarterly report on the federal student loan portfolio. The report touches on a few positive findings – delinquency rates have been dropping each year, and as of June 2016 the delinquency rate reached 18.9%. That drop is attributed to the expansion of income-based repayment options implemented by the Obama administration. Still, of those loans in repayment, 42.2% aren’t being repaid due to delinquency, default or bankruptcy, temporary deferment, or disability. Defaults are on the rise, with more than 1.1 million borrowers entering default in the last year. Borrowers are enrolling in income-based repayment plans, but failing to provide the necessary income documentation to remain in these plans. The government places most of the blame on servicers for difficulty enrolling in IBR plans, while servicers claim the sheer amount of options available is confusing and in need of streamlining.

Read the full story here.

ITT tech loses federal financial aid

The government’s crackdown on for-profit universities continues as the Department of Education now prohibits the use of federal financial aid when enrolling new students at ITT Technical Institute. If ITT’s schools shut down, the company will be required to pay $153 million to the Department of Education to cover student refunds. Without federal financial aid, new students will need to turn to private lenders or pay out of pocket to attend the for-profit school – both unlikely scenarios, since ITT relies heavily on federal funds, with almost 70 percent of its revenue coming from federal aid. The school has been accused of predatory student lending and misleading its students about their employment prospects and success of its programs.

ITT will also be required to inform its students that the institution has lost its accreditation after the school was determined to not be in compliance with the accreditation criteria earlier this month. Students currently enrolled will be able to continue their studies. Those who decide to pause their studies will most likely be able to discharge their federal loans if ITT shuts down before they obtain a degree.

Read the full story here.

Amazon and Wells Fargo’s student loan partnership dissolves

A recently-announced student loan partnership between Amazon and Wells Fargo has ended after just six weeks. The program was targeted toward members of Amazon Prime’s Student program and planned to offer a .50% interest rate discount on Wells Fargo student loans. Both companies aimed to benefit from the partnership and reach a wider audience, and both companies had been talking about the partnership for more than a year. It’s unclear exactly why the partnership ended, although Wells Fargo’s recent $3.6 million fine due to illegal student loan servicing practices may have something to do with it.

Read the full story here.

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