New Policy On Student Loan Rehabilitation Could Escalate Already High Default Rate

Student Loan Default Rates Could Increase Thanks to new Student Loan Rehab Policy

The Trump administration announced on March 16 that the U.S. Department of Education is allowing lenders to charge up to 16% of the principal loan plus interest on defaulted student loans. This policy does not apply to those who took out Federal Direct Loans with the U.S Department of Education, but does affect those who borrowed from banks and other institutions. This new policy on student loan rehabilitation could escalate already high default rates on federal loans.

New Policy On Student Loan Rehabilitation

As we wrote about last week, the default rate for student loan borrowers increased 17% from 2015 to 2016 leaving borrowers to wonder what to do if they default on their student loans.

How to Get Out of Default with a Loan Rehabilitation

There are still ways to get student loans out of default with a loan rehabilitation, but this new policy could financially hurt some borrowers in default. The new policy roles back a 2015 initiative by Obama’s Department of Education to prohibit student loan lenders from charging collection fees if the borrower had enrolled in a program to make loan payments within 60 days of defaulting on their student loan.

Story originally published on Daniel R. Gamez is a debt relief attorney licensed to practice in all state and federal courts in California and Texas. To submit a debt relief success story or a debt relief question, email Follow Daniel on Twitter @gamezlawfirm.