Student Loans in the US have had much revising of late, and President Donald Trump’s administration has put into place a contract that will add to the changes, with a direct effect on borrowers. This new contract will mean that four private companies now handle federal student loans, that have still to be paid back. This amounts to billions of dollars, and so is no small plan. This is said to streamline to entire process of collecting repayments of the outstanding student loans, and increase efficiency both on the collection and customer service end of the job.
Under President Obama, trillions of dollars in loans were moved from US banks, to federal government. However this has done a U-turn under Trump as we see them leave federal government and become managed by private companies instead. This is predicted to set up a user system that is more straightforward for borrowers of loans to get in touch with the information and authority they need to. Under Obama’s federal system it was said to be more chaotic, however many people still argue that this was still the better system for the borrower.
Of the four companies taking over the outstanding student loans, Navient Corp (NAVI.O), is the most sizable, and have seen stocks rise by large amounts. It has been reported however that the consumer watchdog for finances, The Consumer Financial Protection Bureau, has taken Navient to court. They claim that borrowers have been deceived by this company in regards to repayments and rates of borrowing in the past, and they are fighting for the rights of those consumers.
It was reported that amongst this change, it is also proposed that the ability to have student loans written off after public sector workers have worked and re-payed during 10 years of service is said to be scrapped. While these changes mean higher profits for the loan industry, and perhaps a higher recoup rate for these federal student loans, it will hit borrowers extremely hard. Many of them will have set a repayment plan in motion, taking into consideration the circumstance that may reduce their overall bill. This can help inspire working hard and get the loan paid off, however many of the incentives may not survive much longer under the new Trump regime.