According to a Tuesday analysis from the Consumer Federation of America (CFA), millions of Americans have fallen behind on their student loans. The data, obtained from the U.S. Department of Education, reveals 42.4 million people in the U.S. owed $1.3 trillion in federal student loans by the end of 2016. Since 2013, the average amount owed per borrower increased by 17 percent.
Back in 2015, the Obama administration issued a memo that prevented debt collectors from charging high interest rates on overdue student loans. So long as the borrower entered the government’s loan-rehabilitation program within 60 days of defaulting, agencies of the old, bank-based Federal Family Education Loan Program (FFELP) were forbidden from charging up to 16 percent of personal and accrued interest. Still, some lawmakers argue that debt collectors continue to impose these fees, despite the Obama regulations.
As part of an ongoing legal case, the U.S. District Court gave the Trump administration until March 16 to decide whether to uphold the Obama-era guidelines.
Senator Elizabeth Warren and Representative Suzanne Bonamici, both Democrats, penned a letter Monday asking Secretary of Education Betsy DeVos to uphold the previous memo. “We urge the [Department of Education] to stand by its previous guidance and give borrowers in default a chance to rehabilitate their loans and successfully repay their debt without being charged massive collection fees,” the letter reads.