In response to the decision by Secretary of Education Betsy DeVos to roll back protections for student loan borrowers, a coalition of state attorneys general are accusing DeVos of failing America’s students.
This morning, the coalition sent a letter [PDF] to Secy. DeVos, opposing her recent directive to the Federal Student Aid office to withdraw guidance that was designed to help students avoid default and curtail loan servicer misconduct.
The letter is the AGs’ way of expressing “profound concern” for the Department’s recent action “at a time when the need for common-sense federal student loan servicing reforms is undeniable.”
The recently revoked directives were released last summer by the Dept. of Education, in consultation with the Consumer Financial Protection Bureau, in an attempt to enhance guidelines aimed at crafting the way in which the federal government contracts with outside companies to service federal student loans in order to ensure borrowers get the service and protection they deserve.
Additionally, the guidance required FSA to consider servicers’ past behavior when awarding contracts, including whether the company had misled or provided wrong information to borrowers or engaged in abusive consumer service.
“The guidance revoked by the Department was expressly designed to protect borrowers and correct pervasive student loan servicing failures that harm student loan borrowers and their families,” the letter states. “By revoking these critical protections, the Department has abdicated its responsibility to student loan borrowers.”
In her letter revoking the protections, DeVos made vague claims that the previous administration’s processes lacked “consistent objectives.”
The AGs disagree, noting that their offices regularly hear from borrowers who don’t receive the necessary guidance from loan servicers.
“The effect of the Department’s action is to leave student loan borrowers mired in ambiguity and inconsistency that the servicing reforms were intended to prevent,” the AGs wrote.
The letter also points to a number of high-profile investigations, lawsuits, and enforcement actions as evidence that “student loan servicers’ poor practices and servicing failures wreak on the lives of borrowers.”
For example, the Massachusetts AG’s office accused ACS Education Services of failing to properly process struggling borrowers’ applications for income-driven repayment plans. The letter also points Illinois and Washington Attorneys General recent lawsuit against Sallie Mae spin-off Navient, accusing the nation’s largest student loan company of allegedly cheating borrowers out of repayment rights.
The company recently provided an example of some of the issues consumer advocates see with student loan servicers, by explaining in a response [PDF] to the lawsuit that it was under no obligation to actually help student loan borrowers.
“It is shameful that Secretary DeVos and the Department of Education are choosing to side with loan servicers over the needs of students looking to further their education,” New York Attorney General Eric Schneiderman said in a statement. “We should be looking for ways to ease the burden of student debt, not enabling the student loan servicing industry to manipulate and exploit students.”
The letter to DeVos was signed by the Attorneys General of Massachusetts, Illinois, California, Connecticut, Hawaii, Iowa, Kentucky, Maine, Maryland, Minnesota, Mississippi, New Mexico, New York, North Carolina, Oregon, Pennsylvania, Rhode Island, Vermont, Virginia, Washington, and the District of Columbia, as well as the Executive Director of the Office of Consumer Protection of Hawaii.
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