Student Loan News: Wells Fargo Campus Fees, FAFSA Tweets and PSLF

Welcome to Student Loan News, a weekly summary of developments and events affecting college debt in the U.S. Join us each Friday for a look at goings-on that could impact your own student loan situation.

Wells Fargo pulls back on college product fees

As we’ve mentioned in this space, Wells Fargo has come under fire for charging relatively high fees for its products marketed to college students. A government report criticizing the bank over the fees came to light late last year, followed by a recent think-tank study with similar findings.

But now the tide appears to be turning, with Wells Fargo announcing last week that it has introduced new policies to waive some fees for its college customers. The changes, which the bank said it began rolling out in February, include one free overdraft and four free out-of-network ATM withdrawals per month, as well as a refund on one incoming wire transfer.

“With the new benefits, Wells Fargo expects average costs incurred for its reported Campus Card population to be reduced by approximately half,” the bank said.

How it affects YOU: While Wells Fargo (or any other financial institution) deserves kudos for anything that will save its customers money, our previous advice still stands: Shop around before opening a bank account since there are all kinds of deals specifically for college students — and all kinds of ways to avoid banking transaction fees.

Rethinking Public Service Loan Forgiveness

The Public Service Loan Forgiveness (PSLF) program was back in the news this week as a group of Senate Democrats unveiled proposed legislation to revamp it, noting criticism that only a tiny fraction of applicants are approved for forgiveness.

Under the new plan, students would get half of their outstanding student loan balances wiped away after five years of monthly payments with an eligible employer, Politico reported Thursday. Currently, PSLF forgives all remaining balances, but only after 10 years’ worth of qualifying repayments. The proposal would also allow all federal loans and all types of repayment plans to be eligible, the report said, rather than just a few under the present system.

How it affects YOU: While a “PSLF 2.0” would be huge for student loan borrowers, any major changes are unlikely in the near future due to the politics around the issue. The bill to change the program was sponsored by a number of Democratic presidential hopefuls but, as Politico noted, not a single Republican senator has signed on. That said, if you support the changes (or don’t), remember you can always lobby your own senators to back the bill (or not) by making a phone call or sending an email.

More flexibility for 529s

Congress appears likely to pass new legislation to allow those with 529 savings accounts to use leftover funds for repaying student loans, CNBC reports. If enacted, the law would let borrowers to use up to $10,000 from a 529 to put toward their debt. In fact, the new plan would also allow 529 money to go toward home schooling and apprenticeships, the report said.

How it affects YOU: Unfortunately, as the same report notes, a large number of 529 holders might not need this benefit. “Households with the [529] accounts have significantly higher income and wealth than those without them,” it said, citing Federal Reserve data. It added that use of 529s isn’t very widespread, and most holders of these accounts exhaust them by the time they graduate.

Also in the news …

  • The Department of Education is assuring high school students that they won’t lose student aid just for posting pictures of their lavish senior proms, BuzzFeed reports. This comes after Federal Student Aid’s @FAFSA Twitter account jokingly suggested it was evaluating one 17-year-old’s postings of her super-deluxe prom night.
  • Texas is considering a major student loan repayment assistance program (LRAP) for law enforcement officers, according to CBS and Fox affiliates. After their first year’s service, police officers and other eligible borrowers in the state would get 20% of their student debt balance wiped away each year, up to a $20,000 maximum.

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