The Consumer Financial Protection Bureau has said it will not enforce the largest loan consolidation program, which was finalized in 2018, under President Donald Trump.
The decision comes amid growing consumer discontent with the cost of college and the ballooning of federal student loan debt.
The CFPB said it is investigating the program to ensure that consumers can repay their loans as they please.
The agency said in a statement that the agency “has long been clear that the consolidation plan, which began in 2014, is no longer in effect and that we are evaluating its impact on borrowers and the economy.”
“Consolidation is the largest form of student loan consolidation, but consumers will be allowed to use the existing repayment options as they see fit.
This includes, for example, repaying their existing student loans with the traditional methods, paying down the debt and using a new loan repayment plan that uses an alternative repayment schedule, such as the loan forgiveness plan,” the statement read.”
Consumers can also use the program with the new loan forgiveness plans that we recently announced, and we expect this will provide consumers with the same level of options as before the consolidation.
For more information, see this fact sheet and the CFPBs 2018 Student Loan Consolidation Plan Guidance.”
The agency also said it has begun reviewing whether other options are better, including extending the program’s terms or modifying it to better suit the needs of students and families.
The consolidation plan was announced in October 2018, with the Trump administration promising to create a system to reduce debt for students and borrowers, and eliminate debt burdens for middle- and low-income families.
The government had previously set a goal of eliminating the national debt by 2025, but Congress had to delay the goal.
President Donald Trump, left, meets with Consumer Financial Services Director Richard Cordray, center, and Director of the Consumer Financial Protect Bureau Richard Corday, right, at the White House on March 1, 2021.
(Photo: Jacquelyn Martin, AP)The consolidation plans were intended to make college affordable for all Americans, as well as to encourage debt relief for students.
The goal was to reduce federal student debt by about $2 trillion over the next decade.
Under the Trump plan, borrowers would have the option to use a combination of federal loans and private loans, but with a maximum of $50,000 of debt forgiven after five years, as long as they pay their federal loans off within two years.
Federal student loans are often held by students and other households, so the consolidation would allow borrowers to refinance into private loans and use federal student loans to pay down student loans.
But many borrowers, including many students, have debt that has been forgiven, or has been fully discharged, and therefore cannot refinance their federal student debts.
Many of the new federal student borrowers who received loans under the consolidation program would also have their federal loan balances forgiven if they were discharged.
The Consumer Financial Oversight Office, a consumer advocacy group, has said that it found the consolidation was an effective way to reduce the burden on the middle class.