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Millions of student-loan borrowers risk facing debt collectors who were penalized for 'misleading' behavior
Private companies penalized for their student-loan collection tactics may be making a comeback.
As President Donald Trump transfers federal student loans from the Department of Education to the Treasury Department, defaulted borrowers will be routed through the Treasury's "Cross-Servicing program," which uses private contractors to collect federal debts. Two agencies in that system, Pioneer Credit Recovery and Transworld Systems, were previously sued or fined by federal watchdogs for "misleading" or "abusive" practices.
Lawmakers and administration officials in Trump's first term pushed to terminate contracts with private collectors over high costs and accusations of predatory behavior. Former President Joe Biden ended their contracts in 2021. Now, with student-loan defaults at a record high, education policy experts say bringing private collectors back could expose borrowers to higher collection fees, confusion, and greater risk of falling back into default.
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Student loan borrowers will have two new repayment options come July 1. Here's how to pick one
Millions of federal student loan holders will have access to two new repayment options starting July 1, due to changes included in the One Big Beautiful Bill Act. As a result of the legislation, some student loan repayment plans are also going away.
The Repayment Assistance Plan, or RAP, is the U.S. Department of Education's latest income-driven repayment plan, or IDR, meaning it sets borrowers' monthly bills at a share of their income.
The other new option is the Tiered Standard Plan, which includes fixed payments spread over several different timelines, based on a borrower's total debt.
"Borrowers are facing a great deal of confusion and anxiety ahead of the changes," said Jaylon Herbin, âdirector of federal campaigns at the Center for Responsible Lending, a consumer advocacy organization.
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