White House looks to new rules to curb student debt

http://www.militarytimes.com/story/military/benefits/education/2015/10/29/white-house-looks-new-rules-curb-student-debt/74758626/

White House looks to new rules to curb student debt

By Lisa Leff, The Associated Press 1:50 p.m. EDT October 29, 2015

U.S. colleges will face new restrictions on using debit cards to distribute financial aid, and more people will have income-based options for repaying student loans under a pair of regulations given final approval by the Obama administration on Tuesday.
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The first regulation takes aim at the debit and prepaid cards that a growing number of colleges and universities are issuing as student ID cards for use at campus stores and to give out aid and refunds. Federal officials estimate that more than 850 schools enrolling about 9 million students are dispersing nearly $25 billion in student loans and grants with campus-issued cards.
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The GAO and consumer advocates have warned that the convenience the cards offer has been offset in some cases by excessive user fees and by a lack of transparency about alternatives that might be more financially advantageous for students.

Once the new rules take effect in July 2017, campuses will be barred from instructing students to open a specific account for the purpose of receiving financial aid and will instead have to provide a list of choices that includes a student's pre-existing bank account as the default option.

The other regulation finalized Tuesday will allow anyone who financed his or her education with federal loans to have their payments capped at 10 percent of their annual discretionary earnings. Previously, the most lenient income-based repayment schedule was available only to students who obtained their first loans after 2007. The change could benefit as many as 5 million people with outstanding federal student loans, the Education Department said.

Under the terms of the expanded plan, students who took out loans as undergraduates would be eligible to have the balance forgiven after 20 years if they made a good-faith effort to stay current on their payments. Loans issued to graduate students would be forgiven after 25 years.
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