As student loans rise nationwide, Dept. of Ed. announces new regulations

The U.S. Department of Education announced two new sets of regulations Tuesday aimed at helping borrowers pay off their student loans.

The regulations will give students more freedom in choosing how they receive federal aid and let them cap their monthly student loan payment at 10 percent of their annual income, said Under Secretary of the Department of Education Ted Mitchell in a conference call with press Tuesday.

“The first set of regulations will help protect students from unreasonable account fees, safeguard taxpayer dollars and provide transparency regarding accounts offered to students by requiring … information about the costs students incur,” he said. “This will ensure that students have a choice about how to receive their federal aid and will prohibit their personal information from being shared without their consent.”

Under the second set of regulations, which is called the Revised Pay As You Earn plan, five million additional direct loan borrowers will be able to cap their student loan payments at 10 percent of their monthly income in December.

“The REPAYE plan will improve upon the current Pay As You Earn Plan, while extending its protection to all student borrowers with direct loans,” Mitchell said.

The regulations will require institutions to provide students with a list of account options they can borrow from, each presented in a neutral manner and making clear that students can have their student aid deposited to their preexisting bank account, a press release explained.

These regulations come as the average amount of student debt continues to increase. In 2014 the average student loan debt was $28,950, a 2 percent increase from the average in 2013, according to an annual report by The Institute for College Access and Success released Tuesday. The study found that 69 percent of 2014 graduating seniors took out student loans last year.

Boston University spokesman Colin Riley said the average amount of debt for BU loan borrowers is around $36,000 while the median is around $28,000.

“I think we do a very good job of keeping an eye on [the affordability issue] and addressing it,” he said.

Riley said BU does not have loan repayment issues. The default rate is currently below 2 percent, meaning that less than 2 percent of BU student borrowers fail to repay their loans, he said.

“For anyone who loans money — banks, finance institutions, financial firms — they would love to have a default rate that low,” he said. “[Our default rate] says that we have people who are responsible and they have incomes that allow them to do it. That reflects on the value of their degree that they’re getting jobs that help them meet their obligations.”

Riley said he believes the regulations will have a positive impact on all student borrowers.

“When you’re helping people meet their obligations in repaying, then fewer people will end up in default and that reflects well on the student borrower and the university,” he said.

Kian McGee, a sophomore in the School of Hospitality Administration, said these regulations are very important to students of this generation.

“In our generation paying loans off is the hardest thing,” he said. “I think in a 10-year span student loans will increase on average by $10,000 or $15,000. Anything you can do to help towards that cause is definitely constructive.”

Gemma Topaz, a sophomore in the College of Arts and Sciences, said the regulations are a good start, but loans are still stressful for borrowers.

“I think [the regulations] will ease stress but I think it’s not entirely sufficient,” she said. “Your loans will still linger and be there. [The regulations] may help a little bit but it won’t help mask them or make them disappear.”

Katherine Lawlor, a senior in the Questrom School of Business, said the regulations make her feel better about her loans, since they would reduce the excessive fees students must pay to access their loans and financial aid.

“As a senior, student loans are a big thing that I will have to deal with when I graduate. I don’t have a lot of loans to pay back but it’s still enough that it’s going to suck.” she said. “Loans will affect some people more than others depending on how much you have to pay back but overall [the regulations] do ease my stress on the situation a little bit.”