The bottom line is that the decisions made when managing loans are of enormous importance to the financial well-being of millions of people. Market pressures alone will not improve the student loan industry as borrowers are stuck on the service agent selected for them by the government and cannot vote with their feet.

This leaves the government as the only real hope for keeping agents online. Yet the Trump administration has reduced oversight of loan companies. The Consumer Financial Protection Bureau, which acted as a loan watchdog under the Obama administration, has been relatively quiet last year. Indeed, Mick Mulvaney, its new director, seeks to legislate that would weaken the agency.

In the absence of federal action, some states have stepped in to protect borrowers. But in response to industry complaints, Education Secretary Betsy DeVos, warned state regulators not to supervise loan companies, claiming that his department has exclusive jurisdiction over them. Even if states continue to persevere, their actions will not substitute for comprehensive federal oversight.

What is the solution ? We could make the loan system less difficult for borrowers to navigate. In particular, borrowers should be automatically enrolled in an income-based program if they fall behind in their payments. The lengthy process of enrolling and maintaining in these programs should be simplified, with tax records being used to automatically determine payments.

Better still would be a payroll deduction system, like these in England and Australia, where loan repayments fluctuate automatically with income. Some people oppose this approach, arguing that payday deductions prioritize student loans over food and rent. But that lacks the strongest protection of payroll deduction: it cuts payments to zero when incomes drop sufficiently low, putting loans at low of the payment hierarchy.

As it is, we have a punitive garnishment system in place for student loans. In 2017, the bland-named Treasury compensation program seized $ 2.8 billion from defaulting student borrowers. These funds came from the federal working income tax credit, black lung benefits, and Social Security payments that would have gone to retired, disabled or deceased workers and their families.

It makes little sense for the federal government to seize money from these most vulnerable families while avoiding a sane payroll deduction system for working workers.

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