Published On: Thu, Sep 13th, 2018

U.S. Education Department Fights with States Over Student Loan Protections

The U.S. Education Department, led by Secretary Betsy DeVos scaled back consumer protections for student borrowers last year. Six states and the District of Columbia responded by accelerating their own efforts to crack down on abusive lending practices.

DeVos and her department are now trying to stop these efforts.

Last month, Trump administration lawyers filed a “statement of interest” supporting a lawsuit from the Student Loan Servicing Alliance against the District of Columbia for its creation of a student loan ombudsman office, the New York Times reports.

photo/ Mary Pahlke

The administration’s lawyers claim that the District of Columbia is trying to “second-guess” department officials in their selection of loan servicers.

“Federal loans are federal assets and therefore must be controlled and regulated by the federal government,” said Elizabeth Hill, a spokeswoman for Betsy DeVos. Hill called the states’ actions an illegal veto.

The Trump administration has instructed loan servicers, including Navient, which faces several lawsuits, to refuse demands for information by state attorneys general. The Education Department has also denied any direct requests for information from the Consumer Financial Protection Bureau (CFPB) and attorneys general.

Officials at the Education Department say they are blocking access to student loan records due to privacy concerns. That rationale was rejected by a federal judge hearing the CFPB lawsuit against student loan servicer Navient.

Consumer advocates fear that the actions of the Education Department are part of a broader rollback of oversight of student loans.

Treasury Secretary Steven Mnuchin submitted a report in July that criticized the Education Department’s oversight of loan servicing companies. The report noted inconsistent practices and loan servicing failures that harmed some borrowers.

The student loan industry is big business. In 2017, the average college student graduated with $39,400 in student loan debt – an increase of 6% over the previous year. In total, Americans owe over $1.48 trillion in student loan debt. That’s $620 billion more than the total amount of credit card debt in the United States.

Borrowers pay, on average, $351 per month for their student loans, and 11% of borrowers are 90 days or more behind on their payments or are in default.

A report from StudentLoanHero.com in 2015 found that college-related debt has caused more than one-in-three Americans to postpone buying a house, one-in-four to live with their parents, one-in-seven to postpone marriage, and 47% to postpone buying a car.

As part of a report attached to a funding package approved by the Senate, the Education Department has been directed to post “a detailed explanation” of its policy when disclosing records to law enforcement agencies.

Author: Jacob Maslow

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