Biden admin reverses Trump-era student loan policy limiting state oversight: Are you impacted?

Biden’s Education Department recently rolled back Trump-era regulations that limited the authority of the states to oversee borrower protections for federal student loans. See how your loans may be impacted. (iStock)

The Biden administration has reversed a Trump-era student loan policy that blocked state governments from addressing issues with servicing federal student loans, according to a Monday press release from the Department of Education (DOE). 

The action will allow states to enforce borrower bills of rights and similar laws in the hopes of "enhancing oversight and accountability for student loan servicers in order to protect students, borrowers, and taxpayers." Twelve states and the District of Columbia have already instated student loan bills of rights.

The newest guidance from the Department of Education takes effect this week, allowing state governments to regulate and take action against predatory or deceptive student loan servicers on behalf of borrowers within their state.

“Helping more students afford college is a top priority, and effective collaboration among the states and federal government is the best way to ensure that student loan borrowers get the best possible service.”

Most student loan borrowers won't likely feel an immediate effect of this guidance, but the DOE's decision is meant to help detect and prevent predatory student loan lending practices going forward. Keep reading to learn more about what states are doing to protect student loan borrowers and what this means for your college debt. 

If you're looking to borrow private student loans or refinance your current student loans, visit Credible to compare your options.

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What is a student loan bill of rights?

Borrower bills of rights and other state-level student loan servicing laws are meant to protect consumers from predatory lending practices that trap college graduates in a cycle of debt. There are 12 states that currently have student loan bills of rights, including:

  • California
  • Colorado
  • Connecticut
  • District of Columbia
  • Illinois
  • Maryland
  • Maine
  • New Jersey
  • New York
  • Rhode Island
  • Virginia
  • Washington

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Depending on where you live, student loan bills of rights may help you avoid default, end wage garnishment, resolve billing disputes, stop harassment from debt collectors and apply for discharges. This week's ruling by the ED gives more power to the states to enforce these types of measures.

"States have long played an integral role in higher education oversight and have been on the front lines of protecting student borrowers from fraud and abuse," Massachusetts Attorney General Maura Healey said in a statement. "We applaud Secretary Cardona for rejecting the previous interpretation that inaccurately represented the states' authority and emboldened bad actors."

While state governments can help you explore your repayment terms, you have other repayment options. You can consider applying for hardship forbearance on your federal loans, or even refinancing your private student loans. 

Explore student loan interest and refinance rates from real lenders in the table below. You can see your estimated student loan rate on Credible without impacting your credit score.

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What to do if you're a victim of predatory lending practices

Nearly 45 million Americans have more than $1.7 trillion in student debt, and many of them will end up paying thousands in interest charges by the time they pay off their loans. Even worse, many borrowers end up in nonpayment and may even be sued over their student loan debt balances.

If you think your loan servicer is taking part in predatory student lending practices, research the laws in your state to explore your options. You can reach out to your state's attorney general to file a complaint and discuss the best course of action.

You may also be eligible to have your federal student loans discharged if your school closes while you're enrolled or if the school was deceptive about the value of your degree. Visit the Federal Student Aid (FSA) website to learn more about the borrower defense program and other federal protections.

Private student loan borrowers can consider refinancing their loans to a new student loan lender. Private student loan refinancing can also grant you a better interest rate, which can lower your monthly payment and help you save money over the life of your loan. You can compare private student loan lenders on Credible.

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