Changes to federal financial aid

This past month ushered in a restructured schedule for student loan applications, a fresh lawsuit aimed at the largest federal student loan service provider in the nation and a new presidential administration; all of which demands its own share of students’ attention in order for them to maintain financial solvency through their higher education, and beyond.

In October, a new policy from the Department of Education declared that submission channels for the Free Application for Federal Student Aid (FAFSA) would open in the fall, as opposed to the beginning of the new year. The move was made in an attempt to align the application process with the schedule of most colleges and universities throughout the country, as well as allow families to apply using a verified income level, the previous year’s tax returns. This is a change from the previous policy, which required a forward-looking estimate of eventual income, which then needed to be amended after the filing of returns for the next year. While this new deadline simplifies the process, it comes much sooner. For those students unaware of the change, or those who have not filed their application, it is urgent that they submit their applications as soon as possible. Funds in many circumstances are limited, and awarded on a first come, first serve basis. A student could very well face a reduction or loss of expected financial aid due to failure to file in a timely manner here.

In mid-January, the Consumer Financial Protection Bureau (CFPB) filed a suit against Navient, the largest loan servicer in the nation, claiming that the company had profited to the tune of four billion dollars as a result of various forms of fraud and willful negligence. The suit alleges breaches of proper conduct, such as willful misallocation of payments across diverse outstanding loans. There are also allegations that the company misreported forgiven or deferred loans as defaulted, causing the credit scores of debt holders to plummet; moreover, Navient’s bureaucratic misdirection is supposed to have lead purposely to over-payment.

In light of this fraud, students should monitor their debt. Understanding the terms under which student debt was accepted is critical to prevent malpractice by loan providers. For ongoing management, those in debt can familiarize themselves with the National Student Loan Data System (NSLDS) and the payment estimator.

For students who will soon be graduating, there are opportunities to submit income information as a criterion for loan standing. This means that the size and total amount of students’ loan payments can, under certain circumstances, be based upon income.

The new administration and the new legislature’s intentions remain somewhat shrouded. President Trump has discussed capping student loan payments at 12.5 percent of income and forgiving remaining debt after 15 years of good stewardship of student debt, a possible boon to students. Trump has also discussed a major reduction of interest rates.

The possible privatization of the student loan market appears to be less advantageous to students, but this depends largely on the structure of the replacement system. It should be noted that on the campaign trail, Trump fielded the idea that the Dept. of Education could be “largely eliminated.” What this means for the nearly 30 billion dollars in grant money budgeted to the department for students is unknown.

Students should also be aware of the penalties incurred because of the use of drugs when receiving student loans and aid. Generally, arrest for possession of modest amounts of lower class drugs while enrolled in courses will result in strikes, which, if accumulated, will disbar students from student loans and aid. Sale and trafficking charges usually result in immediate revocations of eligibility. There are ways in which the privilege might be redeemed, but the process will significantly set back educational plans.

There are a number of shifts taking place or about to take place in student loan life which is already notoriously tricky to navigate. With filing dates shifting, the commensurate changes to required information, the very real possibility of predatory loan practices from national level lending groups, and the diverse palette of policy prescriptions coming down from the federal level, students of Jewell, as well as students across the country, can hardly afford to let anything slide by them.

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