Skip to main content

Search

Student Loan Law: 2.6.5 Consolidation Interest Rates

Consolidation loans have fixed interest rates. The fixed rate is based on the weighted average of the interest rates on the loans at the time of consolidation, rounded up to the nearest one-eighth of a percentage point. For loans made as of July 1, 2013, there is no longer an 8.25% cap on consolidation loan interest rates.196

Student Loan Law: 2.7.1 Origination Fees

Originations fees have changed over time due to sequestration requirements and amendments to the Higher Education Act. Both FFEL Program loans and Direct Loans have origination fees, with a higher fee applied to PLUS loans. There are no origination fees for Perkins Loans or consolidation loans.

Student Loan Law: 2.7.2 Late Charges and Other Fees

Borrowers may be required to pay a late charge of up to six cents for each dollar of each installment that is late.205 The charge may be assessed if the borrower fails to pay all or a portion of a required installment payment within thirty days after it is due.206 Although late charges are allowed, the Direct Loan servicing contracts in effect as of 2014 stated that, while the servicer has the ability to impose late charges and other fees, these assessments should not be made “at this time.”

Student Loan Law: 2.8.3 Consolidation Loan Disclosures

There are currently no mandatory disclosures required when a borrower applies for a consolidation loan. The Department amended the regulations in 2013 and removed the separate disclosure requirements for consolidation loans.

Student Loan Law: 2.9 Counseling Requirements

The Higher Education Act includes counseling requirements when borrowers first incur loans and after they withdraw or graduate. Initial counseling is supposed to occur prior to the release of the first loan disbursement.165

Student Loan Law: 17.2.5 Gaps in Federal Enforcement

If the Department determines that a school has failed to comply with any of the regulations or standards described above, it has the authority to take a number of actions depending on the regulation violated.

Student Loan Law: 17.2.6 Federal Student Aid Feedback System

Since 2016, the Department has had the Federal Student Aid (FSA) Feedback System, which includes an online complaint portal.343 Students, borrowers, advocates, and others can submit information about schools’ administration of federal student aid programs as well as unfair or deceptive recruitment and marketing practices.344 Complainants who submit using their FSA ID can track the progress and response to their complaint using the online portal.345

Student Loan Law: 17.2.7 Military and Veterans Benefits—For-Profit School Oversight

Many for-profit schools have aggressively recruited military-connected students because—prior to the 2022 change in the 90/10 rule—the education funds provided by the Department of Defense (DoD) and the Department of Veterans Affairs (VA) did not count towards the 90% cap on revenue from Title IV federal student aid—referred to as the 90/10 rule.352 As a result, for every veteran enrolled by a for-profit school, that school could often enroll nine more students who depend entirely on Title IV to pay for school.

Student Loan Law: 17.3.2.1 Generally

In July 2012, the Senate HELP Committee issued a report that described the for-profit education industry’s common use of high-pressure recruiting methods that involve inflated job placement rates and misrepresentations about graduate wages, the transferability of credits, and the employability of graduates in occupations that require licensure.412 State and federal law enforcement actions have targeted the same type of deceptive practices.413 This section examines for-profit abuses in recrui

Student Loan Law: 17.3.2.6 Diploma Mills

Diploma mills essentially sell meaningless or false college or high school credentials.481 Postsecondary diploma mills are defined as entities that (1) for a fee, offer degrees, diplomas, or certificates that may be used to represent to the general public that the individual possessing such a degree, diploma, or certificate has completed a program of postsecondary education or training; (2) require such individual to complete little or no education or coursework to obtain such degree, diploma, or certificate; and (3) lack accreditation by a

Student Loan Law: 17.3.2.8 Online Program Management (OPM)

Online program managers (OPMs) are third-party, for-profit companies that provide services to colleges related to the development and operation of online programs. Colleges contract with OPMs for services such as instructional design, technological platforms, operational services, student recruitment, marketing, faculty training, and student support.

Student Loan Law: Introduction

As discussed in more detail in Chapter 1, supra, loan originations through the Federal Family Education Loan (FFEL) Program ended July 1, 2010. Although no new FFEL Program loans were disbursed after this date, many guaranty agencies continue to service and collect on the outstanding FFEL Program loans that were made before the program was eliminated. Some of these agencies also service Direct Loans.

Consumer Bankruptcy Law and Practice: 28 C.F.R. § 58.26 Procedures all providers shall follow when applying to become approved providers.

(a) A provider applying to become an approved provider shall obtain an application, including appendices, from the United States Trustee.

(b) The provider shall complete the application, including its appendices, and attach the required supporting documents requested in the application.

(c) The provider shall submit the original of the completed application, including completed appendices and the required supporting documents, to the United States Trustee at the address specified on the application form.

Consumer Bankruptcy Law and Practice: 28 C.F.R. § 58.28 Procedures all approved providers shall follow when applying for approval to act as an approved provider for an additional one year period.

(a) To be considered for approval to act as an approved provider for an additional one year term, an approved provider shall reapply by complying with all the requirements specified for providers under 11 U.S.C. 111, and under this part.

(b) Such a provider shall apply no later than 45 days prior to the expiration of its six month probationary period or annual period to be considered for approval for an additional one year period, unless a written extension is granted by the United States Trustee.

Consumer Bankruptcy Law and Practice: 28 C.F.R. § 58.30 Mandatory duty of approved providers to notify United States Trustees of material changes.

(a) An approved provider shall immediately notify the United States Trustee in writing of any material change.

(b) An approved provider shall immediately notify the United States Trustee in writing of any failure by the approved provider to comply with any standard or requirement specified in 11 U.S.C. 111, this part, or the terms under which the United States Trustee approved it to act as an approved provider.

Consumer Bankruptcy Law and Practice: 28 C.F.R. § 58.31 Mandatory duty of approved providers to obtain prior consent of the United States Trustee before taking certain actions.

(a) By accepting the designation to act as an approved provider, a provider agrees to obtain approval from the United States Trustee, prior to making any of the following changes:

(1) The engagement of an independent contractor to provide an instructional course;

(2) Any increase in the fees received from debtors for an instructional course or a change in the provider’s fee policy;

(3) Expansion into additional federal judicial districts;

Consumer Bankruptcy Law and Practice: 28 C.F.R. § 58.32 Continuing requirements for becoming and remaining approved providers.

(a) To become an approved provider, a provider must affirmatively establish, to the satisfaction of the United States Trustee, that the provider at the time of approval:

(1) Satisfies every requirement of this part; and

(2) Provides effective instruction to its debtors.

(b) To remain an approved provider, an approved provider shall affirmatively establish, to the satisfaction of the United States Trustee, that the approved provider:

Consumer Bankruptcy Law and Practice: §§ 58.33(a) through 58.33(f)

To meet the minimum qualifications set forth in § 58.32, and in addition to the other requirements set forth in this part, providers and approved providers shall comply with paragraphs (a) through (n) of this section on a continuing basis:

(a) Compliance with all laws. A provider shall comply with all applicable laws and regulations of the United States and each state in which the provider provides an instructional course including, without limitation, all laws governing licensing and registration.

Consumer Bankruptcy Law and Practice: §§ 58.33(g) through 58.33(n)

(g) Course procedures.

(1) Generally, a provider shall:

(i) Ensure the instructional course contains sufficient learning materials and teaching methodologies so that the debtor receives a minimum of two hours of instruction, regardless of the method of delivery of the course;