Recently, the Obama administration addressed the focus of collection companies related to student loan debt. The goal is to shift this attention from collections to give graduates a fairer way of paying back loans. Currently, the average student loan debt sits at $1.3 trillion with a percentage of that in default. Retooling the way students pay their loans can offer relief to millions of Americans currently in debt, and make it easier for them to do so.

The guidelines for handling this repayment method must be first approved by the Department of Education’s Federal Student Aid office. If approved, the new standards will be written into contracts and given to chosen lenders. Navient and Nelnet are two examples who would handle these new standards of repayment.

One of the core ideas behind these guidelines is to increase information about loan repayment. Many students and graduates are typically unaware of the options they have to repay loans – such as income-driven repayment plans and consolidation. Additionally, some are taken advantage of by different companies who promise to handle the loan or lower payments. This is not the case and many of those companies are part of fraudulent activity. With more information, the Obama administration guidelines would also tackle these illegal activities head on.

As it stands, the Consumer Financial Protection Bureau is working with the Department of Education to help introduce new rules.

The rules and guidelines promise to establish new services to help students. For instance, customer service teams will be trained to specifically handle graduates in critical financial debt who struggle to repay loans. Graduates will also be informed of repayment options before having to make a payment. The guidelines will also encourage communication with borrowers who are facing difficulties, and also offer possible loan cancellation options depending on the circumstance.

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The guidelines will also encourage students to take out loans through the Federal government. This is because of the flexible repayment options mentioned. Private companies who offer “alternate” loans generally have higher interest rates and larger penalties. Those who default with a private lender do not get the same treatment with Federal loan programs. They are also a source of aggressive collection tactics, with the proposed policies are trying to end.

Once the policies are in place, lending companies who do not comply will face severe penalties. In some cases, they could even face liquidation.

Those who deal with student loan debt are often frightened about their future options. The DoE believes this is primarily because of the unprofessional and aggressive tactics of collection agencies. With the above policies in place, however, it is hoped graduates will feel secure in their ability to pay back loans.

These new rules will help graduates find stability, but it is only part of the bigger issue. While the options for payback are numerous, tuition costs continue to increase each year with the average debt amount hanging around $16,000. It is hoped that not only will repayment options continue to grow in flexibility, but that new ways for dealing with swelling student loan debt will emerge and costs of higher education be reduced significantly.