New Legislation to Protect Servicemembers from Student Loan Abuse Proposed in Senate

June 9, 2014

North Carolina Senator Kay Hagan and Iowa Senator Tom Harkin (both Democrats) are sponsoring new legislation that would strengthen existing servicemember benefits related to student loans and expand them. The bill was introduced June 5th and is partially in response to the Justice Department’s recent ruling against some student loan servicers that were overcharging soldier student loan debtors on interest rates.

Active duty servicemember

Active duty servicemembers need stronger student loan protections
Image source: Flickr User DVIDSHUB

Dubbed the Servicemember Higher Education Protection Act, the legislation seeks to simplify the process for servicemembers to get the interest rate reductions while on active duty promised under the existing Servicemember Civil Relief Act (SCRA). Cosponsor Harkin says, “As our recent higher education hearings in the HELP Committee have found, the current financial aid process for servicemembers and their families can be confusing and burdensome. This process has made it very difficult for servicemembers to take advantage of the protections and benefits they are earning through their service.”

“We should be making it easier, not harder, for the men and women sacrificing for our country to pursue a college degree and pay off their student loan debt, particularly at a time when our youngest veterans are facing higher than average unemployment rates and more and more servicemembers are making the transition into civilian life.” – Sen. Kay Hagan

We agree and hope this legislation gets the support it deserves and rapid passage into law. Here’s what the legislation would do for servicemembers:

#1 Requires the Department of Education to comply with a law to update a website with information about federal and state educational financial assistance for members of the Armed Forces, veterans and their families. (Shame on the DOE for not already doing this!)

#2 Requires the Secretary of Education to simplify the process for servicemembers to take advantage of existing benefits by creating one enrollment form rather than the myriad that must be waded through now. (Again, shame on the DOE for not already doing this!)

#3 Requires the Department of Education to record and display military and veteran status in the National Student Loan Data System (again, shame on DOE for not doing something so easy and obvious) – this should fast track approval of benefits.

#4 Creates a cross-agency group to ensure Education Service Officers have all the information needed to help servicemembers and their spouses in the process of choosing a school. (Again, why aren’t these agencies proactively helping soldiers without being forced to by law?)

#5 Cuts the red tape and amount of paperwork required for active duty servicemembers to cut the interest rate on all loans down to 6% for debt incurred prior to active duty. This is key because lenders often throw up roadblocks and deny benefits. (Shame on lenders for shenanigans and denials!)

#6 Would extend SCRA interest rate reductions for 12 months after the end of active duty on student loans and other loans – this is already in place for mortgages. This is crucial because unemployment while coming off of ative duty is common. (Yeah! A common sense suggestion!)

#7 Allows servicemembers that consolidate loans while on active duty to get into Income Based Repayment or Public Service Loan Forgiveness to keep their 6% interest rate protection under SCRA. As this is technically “new” debt, the benefit would otherwise be lost. (Yeah!!)

#8 Creates an automatic deferment for spouses of active duty members who are themselves student loan debtors after a permanent change of station (PCS) move for up to six months. This makes sense also because many spouses work, but it takes time to find a job after a move. (Yeah!!)

#9 Requires the Department of Defense, Veterans Administration and Department of Education to ensure that servicemembers with 100% disability have their loans automatically discharged. This protection is already in place, but not being delivered consistently. (Shame, shame, shame on all three departments for not complying!)

#10 Several other protections that you can read about here related to PSLF, requirements for schools to work better with veterans and other government agencies to be more transparent, ensure protections are upheld and information is complete and provided as needed. (More shame on all those not already doing these things!)

It’s really an embarrassment that a law has to be proposed to force government agencies to comply with laws already in existence. If we, as citizens, ignore laws, we end up with a fine, fee, ticket or behind bars. When the government ignores its own law, it seems like it’s no big deal. It’s a huge deal – particularly when it comes to servicemembers that are protecting our freedoms, in less than ideal conditions and for less than ideal pay.

Let’s hope Senate Bill 2448 gets out of committee fast and on to a vote. Contact your Senator and tell them to get this bill out of committee, up for a vote and to vote in favor of it. If your Senator is on the Committee for Veterans’ Affairs (see list here), it’s even more important that you apply pressure on them to get this bill out for a vote ASAP.

If you’re a veteran or active duty servicemember with student loans, keeping track of what you owe can be complicated. Use Tuition.io’s free student loan tool to see all of your loans in one easy dashboard, track your payments, contact your lenders and more. Also check out our Student Loan Help Center for information on deferment, forbearance, forgiveness and a host of other topics.