Current and former students in the U.S. reportedly owe more than $1 trillion in public and private student loans. For many, the burden of student loan debt nearly eliminates any benefit of the education obtained with the loan proceeds. Making matters worse is the fact that federal bankruptcy law specifically excludes student loans from discharge. The U.S. Department of Education (DOE) recently announced two changes to student loan repayment rules, which apply to loans made through various DOE programs. The new rules do not affect a student loan debtor’s rights in bankruptcy in any way, but they may ease their debt burden in other ways.
Federal and state regulators have gone to great lengths to prevent financial marketing that could potentially mislead students. The Credit Card Accountability Responsibility and Disclosure (Credit CARD) Act of 2009, for example, largely prohibits credit card marketing on college campuses.
The first new rule announced by the DOE addresses prepaid debit cards and similar financial products. Numerous colleges have deals with banks that allow them to market prepaid cards to students as a convenient means of accessing student loan funds, sometimes without clearly disclosing overdraft and other transaction fees.. The DOE’s new rule requires schools to let students choose where to deposit their student loan funds, and it prohibits them from creating an impression that students must use a particular kind of account for their funds. 80 Fed. Reg. 67125 (Oct. 30, 2015).