Fee Increase for Struggling Student Loan Borrowers

The Education Department has reversed an Obama administration rule that limited fees that guaranty companies could charge distressed borrowers. The new rule allows guaranty companies to charge borrowers 16% of their loan balance, even if they agree within 60 days to make good on their debt. This article on Bloomberg details the rule change and its impacts. You can read the Education Department memorandum on the change here <link no longer valid>. Guaranty agencies are state or private agencies that administer the federal student loan program. In addition to insuring lenders against default and paying them off when loans default, they also play a collections role with debtors.