WASHINGTON, DC - A recent Bloomberg news article is reporting that the U.S. Department of Education may issue a proposal that would prohibit state law from regulating servicers and student loan debt collectors. Such a move would be an aggressive form of preemption of state laws by the Trump Administration and Education Secretary Betsy DeVos.
An alternative view held by 26 state attorneys general (AGs) was also shared last fall with Secretary DeVos, that clarified the rights of states to enforce their own laws, along with federal statutes, like the Higher Education Act, that narrowly limit federal preemption of state laws and related debt collection.
At both the state and federal levels, key enforcement actions have held these companies accountable. For example, Navient, the nation’s largest student loan servicer was sued by the Consumer Financial Protection Bureau (CFPB) as well as by Pennsylvania Attorney Josh Shapiro who termed the company’s practices as deceptive and predatory. Just this month, the Federal Trade Commission filed a lawsuit against three student loan debt relief companies in California for its alleged consumer scams.
In response the recent news report, Whitney Barkley-Denney, a policy counsel with the Center for Responsible Lending (CRL) issued the following statement:
Once again, the Department of Education has revealed that it is on the side of companies instead of standing by borrowers and their families. Acting at the behest of servicers and their lobbyists denies an opportunity for comment by the 44 million Americans who share the burden of a still-growing $1.4 trillion in student loan debt.
Secretary DeVos must acknowledge that poor student loan servicing and servicer errors contributed to more than 50,000 complaints filed with the Consumer Financial Protection Bureau. By CFPB’s own analysis, the largest number of student loan complaints came from one of five states that tallied 2,600 complaints or more: California, New York, Florida, Texas and Pennsylvania. In these states and three others – Georgia, Illinois and Ohio – debt totals tallied by complaints ranged from a low of $53 billion in Georgia, to a state high of $129 billion in California.
This kind of caving to special interests abandons the Department’s duty to be a thrifty steward of the public purse. Consumers are entitled to support and response from all levels of government. Hence, states must preserve their ability to protect borrowers residing in their respective jurisdictions. There is simply no precedent or provision for such a federal fiat.
For more information or to schedule an interview, contact Charlene Crowell at Charlene.email@example.com
- Federal Student Loan Portfolio by Borrowers’ States (pdf)
- Group State Attorneys General Letter to Secretary DeVos (pdf), October 23, 2017
- CFPB 50 State Snapshot of Student Debt (pdf), October 2017