Attorney General Josh Shapiro Demands U.S. Department of Education Secretary Betsy DeVos Stop Rolling Back Critical Protections for Student Borrowers

September 26, 2017

Pennsylvania Attorney General Shapiro leads 18 Other State Attorneys General to Protect Student Borrowers in Letter to Education Secretary DeVos

HARRISBURG – Today, Attorney General Josh Shapiro led a coalition of Attorneys General to send a letter to U.S. Department of Education Secretary Betsy DeVos, demanding the Department of Education stop its systematic rolling back of critical protections for student loan borrowers.

“With a rising number of students burdened by college loan debt or in default, this is exactly the wrong time for the Department of Education to abandon its responsibility to protect students from deceptive practices by for-profit schools and federal loan servicers,” Pennsylvania Attorney General Shapiro said. “Secretary DeVos is bending her own Department’s rules to help lenders and borrowers who rip off Pennsylvania families. If Secretary DeVos won’t protect students from these kinds of scams, we will.”

The letter to Secretary DeVos, initiated by Pennsylvania Attorney General Josh Shapiro and joined by 18 State Attorneys General, finds three main faults with a letter sent in August by the Department of Education to the Consumer Financial Protection Bureau (CFPB), in which the Department terminated two key memoranda of understanding it had with CFPB.

  • The Department of Education falsely asserted it has exclusive jurisdiction over companies that service federal student loans when, in fact, student loan servicers are under the jurisdiction of the CFPB, Federal Trade Commission, Department of Justice, Attorneys General and other law enforcement agencies.
  • The letter is the latest in a series of actions by the Department of Education to strip critical protections for millions of students and families repaying student loans.
  • The Department of Education misrepresents the strong work done by the Consumer Financial Protection Bureau on behalf of students and families across the country.

As the Attorneys General’s letter details: “Contrary to the Department’s assertion, Congress did not exempt the $1.3 trillion federal student loan market from the Consumer Financial Protection Bureau’s jurisdiction – or from the jurisdiction of any other law enforcement agencies. … Not only is the Department’s assertion demonstrably false, but such an exemption would make no sense – the market for federal student loan servicers is bigger than any other consumer finance market except mortgages. Moreover, student loan borrowers, who in most cases cannot discharge their student loans through bankruptcy, are among the most vulnerable borrowers.”

The Department of Education’s August 31st letter terminated two memoranda of understanding with the Consumer Financial Protection Bureau, critical protections designed to streamline the supervision of student loan servicers. The Attorneys General’s letter makes clear this step harms American families and makes it more difficult for the Consumer Financial Protection Bureau to assist and protect student borrowers.

“The only beneficiaries of the Department’s sweeping rollbacks of consumer protections are the loan servicers and for-profit colleges, and their executives and investors,” Pennsylvania Attorney General Shapiro said. “We strongly recommend the Department of Education focus its efforts on removing the ability of schools selling worthless educational programs to obtain federally guaranteed student loans.”

The Attorneys General’s letter highlights the strong work the Consumer Financial Protection Bureau has done to protect students and families – often in partnership with the Department of Education and state Attorneys General. The letter details the many student loan accomplishments of the Consumer Financial Protection Bureau:

  • Processing complaints from more than 40,000 student loan borrowers from all 50 states
  • With Washington State and Illinois, suing Navient, the nation’s largest student loan servicer, for steering borrowers into costly repayment plans that benefit the servicer, not the borrower
  • Cracking down on abusive for-profit colleges ITT Tech and Corinthian
  • Halting illegal loan servicing practices at Wells Fargo, and
  • Working with state Attorneys General to create an online tool that helps students plan for college by comparing financial aid offers, loan commitments and earnings potential.

Joining Pennsylvania Attorney General Shapiro in signing today’s letter were Attorneys General from California, Connecticut, Delaware, District of Columbia, Hawaii, Illinois, Iowa, Kentucky, Maine, Maryland, Massachusetts, Minnesota, New York, North Carolina, Oregon, Rhode Island, Vermont, Virginia and Washington, as well as the executive director of the Hawaii Office of Consumer Protection.

To view a copy of today’s letter, please click here.

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