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Education & Labor Committee Republicans

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Despite Widespread Complaints, Obama Administration Refuses to Acknowledge Direct Loan Problems

In recent months, a growing number of student loan borrowers and institution leaders have stepped forward to voice complaints about the federal government’s implementation of the Direct Loan Program, which oversees and originates every new federal higher education loan in the country.

According to an article in Wednesday’s Inside Higher Ed, “Persistent problems have plagued the Education Department’s debt management computer systems… For tens of thousands of borrowers, the glitches have become a roadblock to returning to good standing, rehabilitating their loans and becoming eligible for additional student aid.”

Even the Department of Education’s official blog has been inundated with hundreds of complaints about the Direct Loan Program, yet Education Secretary Arne Duncan continues to praise his department’s administration of the program. At a March House Education and the Workforce Committee hearing, Secretary Duncan claimed, “This transition has gone extraordinarily smoothly.”

When pressed by Subcommittee on Higher Education and Workforce Training Chairwoman Virginia Foxx (R-NC) on reports of problems with the Direct Loan Program, Secretary Duncan downplayed the prevalence of complaints, and offered to work with borrowers personally if they’re experiencing issues. Watch the exchange below:

              

“Your department says it’s proud of the way you’ve managed the program but how have you gotten to the point where the department is holding these hard-working people back from repairing their credit and getting their loans back in order. And when are you going to fix it?”
– Rep. Foxx

House Education and the Workforce Committee Republicans are determined to uncover the problems with the Direct Loan Program. Through news reports and conversations with borrowers and higher education officials, a range of issues have come to light, including:   
  • Security breaches on the Direct Loan website, exposing thousands of students’ personal and financial information to potential fraud;
  • Delays in allowing borrowers to “rehabilitate” their loans, putting their credit in jeopardy;
  • Inaccurate and inconsistent reporting of loan delinquency and payment status;
  • Preventing borrowers from participating in alternative repayment plans such as Income Based Repayment or consolidation;
           
  • Losing requests for loan deferment or adjustments;                                                                    
  • Routinely encouraging students to put their loans in forbearance instead of working with borrowers to find the appropriate repayment plan; and
  • Increasing the principal amount due on the loan through inaccurate reports on the website, hitting borrowers with additional interest payments.

In an effort to hold the Department of Education accountable for its management of the Direct Loan Program and promote better services for student loan borrowers, Chairman John Kline (R-MN) recently joined several House and Senate leaders in asking the Government Accountability Office to conduct a detailed review of the implementation challenges facing the program, stating, “Bureaucratic problems within the department that are creating additional issues for borrowers could have serious implications not only for the Direct Loan program, but also for the financial stability of all student loan borrowers.”


The committee is also gathering additional feedback about the Direct Loan Program from borrowers and institution officials. To share experiences or concerns, click here.
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