Limits Upheld on Costs Some Student Loan Guarantors Can Recover

A Department of Education rule that guarantors who buy student loans that are on the verge of default can’t charge collection costs if the debtor repays or rehabilitates their loans within 60 days is valid, the DC Circuit said Tuesday.

Ascendium Education Solutions Inc. argued that the new rule was arbitrary and inconsistent with the Federal Family Education Loan Program, but the opinion by Judge Florence Y. Pan said that the rule is lawful.

The program “incentivized financial institutions to lend money to borrowers with poor credit or low incomes by establishing a network of guarantors, which would protect against ...