NAICU Washington Update

Ban on Student Loan Collection Fees Halted

March 04, 2022

Last week, U.S. District Court Judge Carl J. Nichols struck down a ban on student loan collectors charging large fees to borrowers who default on their debt but quickly agree to repay. The policy, which has been supported by Democrats and Republicans, prohibited student loan guaranty agencies from charging collection fees to borrowers in cases where the borrower signs an agreement to repay their debt within 60 days after falling into default. 

The lawsuit challenging the fee ban was brought by Ascendium Education Solutions, one of the nation’s largest student loan guaranty agencies. The judge articulated that the practice of not allowing a guaranty agency to charge collection fees during default was a violation of the Higher Education Act. The Department of Education indicated that it is reviewing the decision and remains committed to helping borrowers in default get back into repayment status. 

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