Is Treasury Best Suited To Handle Student Financial Aid?

"An idea that took shape in the Obama administration is getting fresh attention under President Trump as the Education Department considers handing the operations of its student aid office to the Treasury Department. But the move would be no small feat and could have limited effects if the financial aid system remains the labyrinth that it is today," The Washington Post reports.
 
"The Trump administration’s interest in overhauling the student aid office came to light in a resignation letter sent last week by James Runcie, the head of the Office of Federal Student Aid at the Education Department. He complained of the preoccupation with transferring functions of the student aid office to Treasury when there were more pressing matters at hand, including a student loan servicing contract bid and building out the expansion of the Pell Grant program. ...
 
Justin Draeger, president of the National Association of Student Financial Aid Administrators, said: 'Student aid is part of a comprehensive education policy basket, and separating out those baskets from policy and implementation, which is FSA, has some pretty significant risks.'
 
The only benefit Draeger sees in moving the student aid office to Treasury is if it eventually leads to automatic payroll deduction for student loan repayment. That idea, which has broad support among liberal and conservative policy wonks, would have the government enroll borrowers in an income-driven plan and withhold payments from their paychecks, much like Social Security taxes.
 
It could substantially reduce defaults and delinquency while keeping payments affordable, but some worry automatic repayment could prioritize student debt over other financial obligations to the detriment of low-wage workers. Paycheck withholding was considered during the Clinton administration after a 1995 report examined whether the Education Department should transfer student loans to the IRS."
 
NASFAA's "Headlines" section highlights media coverage of financial aid to help members stay up to date with the latest news. Inclusion in Today's News does not imply endorsement of the material or guarantee the accuracy of information presented.

 

Publication Date: 6/5/2017

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