No products in the cart.
The Ministry of Education ordered in 2017 that lending companies working for the agency should not respond directly to requests for information from third parties such as attorneys general. It requested that these requests for information be sent instead to the department, which often denied them.
Trump-era policies hampered outside investigation or oversight of the handful of companies hired by the Department of Education to collect the $ 1.5 trillion in outstanding federal debt on student loans of approximately 40 million Americans. Companies include Navient, Nelnet, and the Pennsylvania Higher Education Assistance Agency (PHEAA), which operates under the FedLoan Servicing brand.
According to a new policy that Cordray outlined on Friday, the Department of Education will create a “streamlined and expedited process” for any federal, state or local government agency to request access to information they need to investigate or obtain student loan companies supervise.
Cordray, a former Ohio attorney general, said he wanted to make it easier for attorneys general and other regulators to access information they need to oversee companies that collect state student loans. “It’s time for us to be a partner, not a barrier,” Cordray wrote in a blog post announcing the change.
“States and regulators need information if they believe a credit services company is in breach of a law or regulation,” added Cordray. “To be sure, you need to look at companies’ policies and procedures, their manuals, customer complaints, and anything else that shows how the company works.”
In recent years, student loan providers have been faced with a spate of lawsuits from attorneys general accusing them of ill-treating borrowers in violation of state consumer protection laws.
Navient is fighting lawsuits from six states: Illinois, Pennsylvania, California, Mississippi, New Jersey, and Washington.
PHEAA recently resolved a lawsuit with Massachusetts Attorney General Maura Healey, a Democrat, over the handling of the public service loan program. The company is also facing a similar lawsuit from New York Attorney General Letitia James, a Democrat.
Earlier this week, Colorado’s Attorney General Phil Weiser, a Democrat, sued the PHEAA for refusing to turn over records to state regulators to assess the company’s administration of state student loans during the pandemic.
An Education Department official told POLITICO that the agency reached out to PHEAA Friday regarding the Colorado lawsuit. The state’s request for information will fall under the new, more permissive policy of the Biden administration, according to the official.
Consumer advocates and Democratic attorneys general had urged the Biden government to take a more collaborative approach to overseeing student loan service providers.
The student loan industry, which urged the Trump administration to join its fight against state regulations, has argued that states do not have the power to regulate businesses when they are working on behalf of the federal government. Companies also say that it would be too costly if they had to comply with different sets of rules in different countries.
Rep. Virginia Foxx, the top Republican on the House of Representatives Education Committee, criticized the new approach, saying Cordray’s guidelines “bow to the whims of state Democratic politicians more interested in bringing businesses out of business than struggling student loan borrowers help. ”
“Congress mandates the FSA to run the federal student loan program for a reason. Federal programs need state leadership, ”said Foxx of North Carolina. “Still, COO Cordray’s first job is to pass on his responsibility to others.”
Cordray’s new policy will also make it easier for the Consumer Financial Protection Bureau, which he previously chaired, to oversee government student loan administrators. The CFPB and Trump Education Department often argued over the consumer bureau’s access to information about government student loan service providers.
Kathy Kraninger, the Trump-appointed CFPB director, accused the Department of Education in 2019 of obstructing access to information regulators need to monitor loan service providers. The CFPB and the Department of Education later announced that they had reached an agreement to jointly monitor the companies, but did not provide public details on how this would work.
In addition to the policy reversed by Cordray on Friday, the Trump administration has also issued a legal opinion excluding state student loan administrators from state rules. The memo, which the Biden administration did not overturn, argues that federal law anticipates state regulation of student loan services.
The Ministry of Education did not want to say on Friday whether the administration intended to delete or change DeVos’ legal opinion. One ministry official just said the administration is “studying how federal laws interact with government efforts to ensure that student loan borrowers receive quality service”.
Attorneys-General, including some Republicans, strongly opposed the Trump administration’s efforts to forestall state laws regarding student loan servicing. State banking regulators and the National Governor’s Association have also opposed DeVos ‘guidelines, which they said impaired states’ powers to regulate companies operating within their borders.