Student Aid Bill of Rights Under President Obama

Posted By Law Office of Simon Goldenberg, PLLC || 12-Aug-2015

Higher education is supposed to be a means of transitioning a young mind into the work force. However, in this day and age with historically high tuition rates, attending college has many students taking out massive loans to finance their education. This overwhelming industry of debt has now grown so unruly that there is over 1 trillion dollars in outstanding student loans. For years every president has put forth their plan to overhaul the the student loans industry, only to see tuition rates and student debts grow. This past March, President Obama decided it was his turn to assemble a plan laying out his ideas to fix the broken student loans system. His plan is drafted out in what he calls the Student Aid Bill of Rights.

Student Aid Bill of Rights

Obama’s “Student Aid Bill of Rights” is a road map and a series of proposals meant to establish the principles that the President has declared as “rights”. Below are the principle listed out in Obama’s Student Aid Bill of Rights.

  1. Every student deserves access to a quality, affordable education at a college that’s cutting costs and increasing learning.

  2. Every student should be able to access the resources needed to pay for college.

  3. Every borrower has the right to an affordable repayment plan.

  4. And every borrower has the right to quality customer service, reliable information, and fair treatment, even if they struggle to repay their loans.

How Does President Obama Plan to Grant Students These Rights?

On the official White House website President Obama has placed out a list of policies he has proposed in hopes of actualizing his Bill of rights. For your convenience I will summarize his plan here.

  1. Every student deserves access to a quality, affordable education at a college that’s cutting costs and increasing learning.

In hopes of bringing around this principle Obama has laid out a series of proposals. This particular “right” is can be more easily defined as 2 individual goals: improve the quality of education and make college more affordable. In order to make college more affordable President Obama has proposed the America’s College Promise. This proposal would grant any would be student in good standing (someone who has never dropped out of school before and no prior college education) up to 2 free years of community college. The thought being that since those credits would go towards a 4 year degree that it would cut any potentially needed loans in half. In regards to improving quality of education The President has proposed adding $200 million to his First in the World Grant program. This program rewards Universities who take action to reduce costs for students or take on new programs in attempts to improve the quality of education offered at the Schools. In addition to these proposals The President has issued orders to the Department of Education to revamp the college rating system. The new system would go beyond the current scheme of just listing schools by prestige and difficulty of admittance. The new system would be based on Value of Degree (Alumni hiring percentages, Alumni starting salaries, etc.). Ultimately this overhaul of the rating system is designed to ensure that students can find the best college in their price range as the most common cause of the student loan crisis is that students target big name, high priced private universities over affordable public colleges.

  1. Every student should be able to access the resources needed to pay for college.

The President's plan for activating this next “right” largely comes down to reworking and building on already existing government programs chiefly Pell grants, and improving on Education Tax Benefits. Early in his tenure as president, Obama increased the maximum Pell Grant to $5,730, to build on the increase the president has been proposing a new inflation clause to the Pell Grant program which would have the maximum grant payout reflect the U.S. inflation rate. Prior to The President’s proposed Student Loans Bill of Rights, He created the American Opportunity Tax credit which grants families up $10,000 in returnable tax credits. As part of his Bill of Rights proposal President Obama plans to extend the coverage of this tax credit to 5 years. Beyond this he plans to eliminate taxes on student loans that are being paid on the Income-based payment system.

  1. Every borrower has the right to an affordable repayment plan.

The President’s plan to establish affordable repayment plans dates back 5 years to the Health Care and Education Reconciliation Act of 2010. With the passing of the Act the government eliminated all subsidies for banks that issue student loans and moved all responsibility of future loans to the Federal Direct loan program. The idea for transitioning to a direct-Loan structure being that if the government takes over all loans they can protect borrowers from penalties and grant them less stressful payment plans. Under this newly enlarged direct-loan structure, a Pay As You Go plan was implemented that allows all direct loan borrowers to cap their payments at 10% of their monthly income.

  1. And every borrower has the right to quality customer service, reliable information, and fair treatment, even if they struggle to repay their loans.

Much like the rest of the Student Loans Bill of Rights attainment process of this principle has been in the works long before the president publicized his desire for said rights. Over the past few years the president has had The Board of Ed. working to overhaul the Federal Loan service with a major focus on its internet services. The changes that came, have largely been the biggest success of the Student Loans Bill of Rights. By crafting new tools into the Federal Loan website, Potential borrowers have been granted a wealth of information on the loan process with easy access. These tools serve primarily as a financial aid counselor to educate potential borrowers with financial advice on the loan process; helping to prevent students from ensnaring themselves in a payback plan that will become toxic. Additionally The Department of Education has incorporated new tools that have drastically shortened the Free Application for Federal Student Aid Form (FAFSA) and allowed Financial Aid filers to easily access their IRS records greatly reducing the time needed to fill out their Financial Aid applications. Since the completion of the web based overhaul the Board of Ed. has started on a massive social media campaign to inform potential future students of of all the changes.

In discussing principle III of the student bill of rights I mentioned that as of 2010 the student loans process was transitioned fully into a direct-loan system. As part of the this transition the government has been able to grant borrowers less stressful payment plans with lower penalties . As part of this government takeover loan servicers are incentivized to assist borrowers in paying of their loans. Government servicers are rewarded for quality service to debtor and receive extra compensation for working to help borrowers make their payments on time. Through this system borrowers are granted a far kinder and more fair repayment process.

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