[ad_1]
Join Fox News to access this content
Plus, use your account to get special access to selected articles and other premium content – free.
By entering your email to continue, you agree to Fox News Terms of Use and Privacy Policy. This includes notifications of financial incentives.
Please enter a valid email address.
Are there any problems? click here.
Since its founding in 1979, the US Department of Education (DOE) has shaping federal student loan policies, affecting the rising costs of education and the loans that pay it. As President Donald Trump cuts down significantly and ultimately shrinks the shutter, one expert says the entirely private loan system works better than turning controls to other government agencies.
“The Clinton administration introduced the direct loan program, so this was kind of the competitor to the quasi public-private system, where now the government was going to be the one issuing the loans, and both systems kind of coexisted for a couple years, until 2010, when we got Obamacare, and that basically used some of the paper profits from switching all the loans to government loans to help pay for Obamacare,” Cato Institute expert Andrew Gillen told News digital in Fox interviews.
“So, since 2010, we have been in an area where we are lending governments,” he added.
California under investigation by Trump administrators who allegedly hide their child’s “gender identity”
Morning Sun lights the front of Washington’s Department of Education building on February 4, 2025 (Reuters/Kevin Lamarck)
Initially, after Trump signed an executive order that dismantled the DOE in March, the administration proposed to transfer its $1.6 trillion student loan portfolio to the Small Business Administration (SBA). However, recent developments show that the Treasury could be liable for federal student loans.
The Trump administration has also proposed transferring Pell grants and Title I funds to other federal agencies, effectively reducing the role of the department in overseeing key education programs.
“I don’t think this will have a real impact if we just move student loans to the Treasury Department and nothing else changes about the system,” Gillen said. “Therefore, all of these loan terms are set by the council, so simply changing the management base of managers who oversee the documents in the background will have no impact.”
The current system encourages “bad investments” by funding students and education without realistic expectations of repayment, Gillen said. Instead, private lenders who prioritize repayment risk may avoid financing such loans. He suggested that moving to the private system would provide better incentives for both universities and students as the university is likely to pressure students to generate students who can pay off their loans and students are more likely to choose the areas that will lead to successful careers.
Girls’ “unfair” comments about sports record as governor: “Absolute bull–“
Education Secretary Linda McMahon speaks to Fox News political anchor Brett Byer after President Donald Trump moves in to tear down her agency. (Fox News/Special Report)
The government has made it difficult to release student loans through bankruptcy, Gillen said, with a few exceptions, the rule does not apply to private lenders.
“There are a few things we can do to encourage private lenders to be willing to make those loans, so we’re making clear how bankruptcy law works with these income-driven loans,” he said.
Some lawmakers are making an effort to address this issue. Democrats Steve Cohen, Danny K. Davis and Eric Swalwell are reintroducing the private student loan bankruptcy fairness law to allow private student loans to be released in bankruptcy, just like other types of consumer debt.
Student loans, PelGrant, will continue despite downsizing in the education sector, experts say
US Secretary of Education Linda McMahon will attend Washington, DC (Chip Somodevila/Getty Images) on March 20, 2025, at the Executive Order Signing Ceremony to reduce the size and scope of the Department of Education in the Eastern Room of the White House.
Now, the government can decorate wages without the need to file a lawsuit, making the process more efficient and expensive. This is also beneficial to private lenders.
Click here to get the Fox News app
The 1990s saw the introduction of income-driven repayment plans, starting with the Income Group Repayment (ICR) plan under former President Bill Clinton in 1994. These plans allowed borrowers to repay the loan based on their income, extend the loan term and increase the total interest they paid. They provided immediate financial relief, but they also brought higher long-term costs for some borrowers.
By 2024, DOE had acquired approximately $1.6 trillion in student loan debt, issued $85.7 billion in new loans, with $45.3 billion allocated for undergraduate education and $40.4 billion in graduate education.
[ad_2]Source link
