The Trump administration says it’s launching a new plan to teach Americans the “benefits and risks” of taking federal student loans, while the country’s student debt load is already closing in on $1.7 trillion.
The announcement came from the U.S. Department of Education, which now wants to hand out more information to students and families before they borrow money for college.
According to a September 5 press release, the department’s Office of the Ombudsman will now “take a proactive approach to improve financial literacy,” claiming this will help borrowers make better decisions before signing loan documents.
That office used to handle complaints, not education. But with recent mass layoffs in March, it’s unclear who’s still left to do that job.
Department cuts staff but adds new task
Education expert Mark Kantrowitz asked the obvious question: “The real question is whether there’s anybody left in the Ombudsman’s office to do any of this.” He’s not alone. Critics are questioning how this new student-loan guidance campaign will actually run with fewer people on the ground.
The Trump administration insists there’s an urgent need. More than 42 million Americans hold federal student debt. Of that group, over 6 million are already behind on payments, and more than 5 million are in default. The Department called the numbers “sobering.”
Undersecretary Nicholas Kent said, “By providing clearer guidance and support at the front end of the college journey, we believe students will make more informed decisions that lead to lower debt burdens, stronger repayment outcomes, and greater satisfaction with their educational investment.”
Elaine Rubin, from Edvisors, backed the idea, saying, “Addressing financial literacy and college costs in the process of financial aid is never a bad thing.”
But here’s the catch. Some say this new push could take attention away from bigger messes. Right now, the Education Department is drowning in more than 1.3 million pending applications for income-driven repayment (IDR) plans. These are the programs meant to make student loan payments more affordable.
Borrowers stuck in limbo as SAVE plan scrapped
The backlog got worse after President Joe Biden’s SAVE plan, Saving on a Valuable Education, got killed off in a Republican-led legal challenge. That plan was supposed to cut bills for millions of borrowers. Instead, the Trump administration passed a bill to repeal it.
Now, many borrowers say they can’t afford any of the remaining repayment plans. Consumer groups argue that instead of helping people stuck in the system, the department is trying to rebrand with shiny “literacy” programs.
Carolina Rodriguez, director of the Education Debt Consumer Assistance Program in New York, said, “By shifting focus to borrower education, it diverts attention from the urgent need to resolve consumer complaints and systemic servicing failures.”
Persis Yu, deputy executive director at the Student Borrower Protection Center, didn’t hold back either: “There is no amount of financial literacy that will solve the more than 1.3 million IDR application backlog or give answers to borrowers who have to wait on hold for several hours to find out the status of their loans.”
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Source: https://www.cryptopolitan.com/trump-admin-launches-student-loan-literacy/