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Federal politics look to impact student debt

The Student Academic Services building houses the student financial aid office. Credit: Casey Cascaldo | Photo Editor

Whenever a new semester nears, Ohio State students make their way to Buckeye Link to make sure their fees are paid for the semester.

For many students, this means accepting student loans. It is simple enough. Buckeye Link has already determined what amount needs to be accepted. All that needs to be done is a confirmation and the payment of fees will take care of itself.

Most students will not grapple with their loans until after graduation, when it becomes debt. According to Forbes, there are currently 44.2 million borrowers doing just that, adding up to $1.52 trillion in student loan debt.

Those borrowers got a scare when Seth Frotman, the Consumer Financial Protection Bureau’s student loan ombudsman — the issue has now become political and will likely come into play when Ohio’s major campaigns come to college campuses.e top watchdog for student loan providers — resigned in late August, and in the process accused the current administration of hostility toward borrowers.

“We have a system that is a debt-based system unfortunately,” said Heather Jarvis, a public interest lawyer who has focused her work on student loans since 2005. “What we learned from the resignation of the ombudsman is that the present administration is actively working to make things even more difficult than they already have been for borrowers and consumers.”

The issue has now become political and will likely come into play when Ohio’s major campaigns come to college campuses.

Richard Cordray, Democratic gubernatorial candidate and the former head of the CFPB, said in a statement to The Lantern that there is still much work to be done, citing his own time closing for-profit colleges “that cheated students out of their hard-earned money,” adding that he also fought against lenders who “were saddling students with debt.”

“However, it’s clear that there’s still much more we need to do to keep higher education accessible for families in Ohio, which ranks near the bottom nationally in college affordability,” Cordray said in the statement.

Fellow Democrat Sherrod Brown, who is running to keep his Senate seat against Jim Renacci, a Republican House representative, introduced the legislation that originally created the ombudsman position and shares Cordray’s concerns about oversight.

“Shady lenders and predatory for-profit schools gained an ally at the CFPB, while students have lost their chief watchdog,” Brown said in an official statement from his Senate office. “The CFPB needs an independent director who will fight for service members and students.”

The gubernatorial campaign of Republican Mike DeWine, who is Ohio’s attorney general, did not respond to a request for comment, and neither did the Renacci camp.

Frotman’s resignation letter cited the lack of support from the Department of Education for the CFPB’s work as a major barrier to overseeing the student loan industry.

“The Bureau’s new political leadership has repeatedly undercut and undermined career CFPB staff working to secure relief for consumers,” Frotman said in the letter. “When the Education Department unilaterally shut the door to routine CFPB oversight of the largest student loan companies, the Bureau’s current leadership folded to political pressure.”

Jarvis said that the Department of Education has never provided great oversight for student loans, but this administration is going a step further.

Source: Federal Reserve Bank of New York Consumer Credit Panel. Credit: Jack Westerheide | Managing Editor for Design

“It has never been the case that the Department of Education has adequately supervised these services or held them accountable for delivering good service to borrowers,” Jarvis said. “But the present administration is signaling to the industry that they can feel free to go ahead and rip off borrowers with impunity.”

Jarvis said the publicity of the resignation is a good example of the rising awareness of the issue. However, she said despite the increased understanding of the issue, people need to do more than just understand the issue, and the information is “a call to action for people that care about affordable higher education.”

Frothman’s resignation letter won’t be in the news cycle forever, but student debt will continue to linger on.

Ohio State students need not look far to see the problem, as according to Forbes Ohio sits at No. 7 among all states for total student debt.

Ohio hosts 1.7 million borrowers whose total debt adds up to $53.5 billion. These numbers bring Ohio’s student debt per capita to $5,700, which is 15.8 percent above the national per capita average of $4,920.

Jarvis said one problem is that student loans make college seem affordable, even if they are not.

“I think that it is important for people evaluating schools to recognize that price matters and that the system of student loans enables us to enroll in school that we honestly can’t afford,” Jarvis said. “So the first thing to do is selecting an education that is within reach and taking what steps you can to minimize your cost so you can minimize your borrowing.”

To that end, according to data from the Federal Reserve Bank of New York Consumer Panel, the highest concentration of student borrowers owe between $10,000 and $25,000. This bracket of borrowers contains more than 12 million people with the second-largest concentration of borrowers falling in the $25,000 to $50,000 range of borrowers. More than 1 million borrowers owe a staggering $100,000 to $150,000.

For most borrowers, it’s not getting better.

Source: Federal Reserve Bank of New York Consumer Credit Panel. Credit: Jack Westerheide | Managing Editor for Design

According to additional data from the FRBNY Consumer Panel, at the end of 2017, 21.3 million borrowers currently on payments either owed the same amount or more than the previous quarter, which amounts to 47.5 percent of all borrowers.

This can all be a scary situation for borrowers, and one where progress is grueling, but Jarvis suggests that nothing is more valuable than education on the topic.

“No one cares about our student debt as much as we do,” Jarvis said. “The system is not friendly, it is not straightforward — in fact, it is difficult to navigate, it’s excessively complex and so students must recognize that they have to inform themselves about their loans.”

For students looking to educate themselves, Jarvis suggests studentaid.gov, where they can familiarize themselves with helpful tools like income-driven repayment plans.

“Don’t expect that your school, your bank or your parents are going to figure it out for you.”

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