Education Department wants to protect predatory student loan collectors
According to a new report from NPR, the U.S. Department of Education is arguing in an internal document that loan servicers should be protected from state rules that are harder on the companies than existing federal law. The internal memo has not been officially released, but it follows several moves which seem to align the federal government with companies like Navient and Nelnet.
Last August, the Education Department declared that it would stop working with the Consumer Financial Protection Bureau after the CFPB sued Navient. the largest student loan servicer in America. The CFPB accused Navient of mismanaging borrower payments and steering struggling borrowers into costly plans, which Navient denied. With the CFPB eliminated from the process of protecting borrowers from predatory loan companies, states argue that this task has fallen to them.
Christopher Peterson, a law professor at the University of Utah, says that the Trump Administration’s pivot is a radical change, noting that in the past the Department of Education worked with federal and state regulators to protect student borrowers and to regulate lenders. Peterson says that the department ending its agreement to share information with the CFPB makes it harder for the bureau to police student lenders. Peterson tells NPR: “And now we’re finding out that the Trump administration is also going to attempt to shut down all oversight and regulation by state governments,” he says. “It appears that the Trump administration doesn’t want anyone to focus on whether the debt collectors are treating student loan borrowers fairly.”
In response to these developments, states have enacted policies such as additional fees, deadlines, transparency requirements, and limits to how far companies can go to collect payment. However, even if the memo makes it into the Federal Register this does not give it the force of law, but it does establish that the federal government is squarely on the side of student loan companies like Navient, which is a break from how it has traditionally operated.
A bipartisan group of 26 state attorney generals, including conservative bastions like Texas, Montana, Kansas, and Montana wrote the Education Department in October, urging Betsy Devos to reject a campaign by student loan servicers and debt collectors to attain immunity. “There is no principled reason for the Department to weaken or box out states just as our combined federal-state efforts against abusive practices in the student loan servicing industry have begun to bear fruit… Nor is there any justification to seek to interfere with the traditional police power of states to protect their own residents from abuses in the marketplace.”