Center for Responsible Lending
With 44 million people together owing a still-climbing $1.5 trillion in student debt, consumers have a huge investment in higher education. And as the price of college continues to rise, student loan borrowing will continue its upward trajectory for the foreseeable future.
At the same time, bad actors with little or no regard for honesty or even legality, have been the focus of many investigations, lawsuits, and settlements at both the state and federal levels of government. When branches of government work collaboratively, particularly in sharing related information, consumers are protected, and these bad actors are held accountable.
That’s a good thing.
So why would Education Secretary Betsy DeVos recently take actions to end good government practices of cooperation? In June, the education department gave notice that it is revising its policy on disclosing student loan information to law enforcement agencies. In effect, this action reversed a decade long practice in which the federal government routinely disclosed student loan information on request to state Attorneys General and other federal agencies who are investigating potential civil fraud and crime.
Allow me to share a portion of this development’s backstory.
Starting last summer, student loan servicers like Navient have been lobbying DeVos to shield them from liability for their practices. And it’s worked. Despite objections from a bipartisan group of Attorneys General, the National Association of Governors, and the Conference of State Bank Supervisors, DeVos and the Department of Education have increasingly made it more difficult for state and federal law enforcement agencies to do their jobs by retracting information sharing agreements with the Consumer Financial Protection Bureau and instructing servicers not share student loan information with state law enforcement and banking supervisors.
In March, the DOE published a memo declaring that state consumer protection laws “undermined” federal regulator requirements. This perspective had no legal basis. The Dodd-Frank Wall Street Reform Act explicitly granted AGs the authority to pursue alleged fraud if there was no effort at the federal level. In short, this memo attempted to pre-empt state laws and related prosecutions.
Some could contend that these developments are an effort to stop AGs from doing their jobs. The CFPB, FTC, and state AG’s will not have access to the information they need to enforce the law.
But with a departmental notice published in the Federal Register, the DOE’s intent has become clear: defrauded student loan borrowers will have to look to the DOE for relief. And if the DOE has no information, we can all wave goodbye to enforcement ions and financial fairness.
Had the DOE been actively working with the CFPB on student loan fraud, there might be a valid explanation. But instead, the DOE has been undermining investigations and enforcement actions at every turn.
So let’s recap: Under DeVos, the education department ended its cooperative relationship with CFPB and tried to pre-empt states from enforcing their own statutes. Now, the decision to withhold related information on active state and federal investigations becomes yet another roadblock to financial fairness.
In response, these and other actions, a coalition representing 20 state AGs sent DeVos a July 13 letter. These elected officials represent the states of: California, Colorado, Connecticut, Delaware, the District of Columbia, Hawaii, Illinois, Iowa, Maine, Maryland, Massachusetts, Minnesota, New Jersey, New York, North Carolina, Oregon, Pennsylvania, Rhode Island, Virginia and Washington.
“The higher education industry requires vigilance and vigorous enforcement from state law enforcement agencies,” wrote the AGs. “We are particularly concerned by predatory practices in the for-profit schools’ industry … We respectfully submit that the Department is making a mistake.”
Consumer advocates agree with AGs.
“If it wasn’t clear before, it certainly is now,” observed Whitney Barkley-Denney, a Senior Policy Counsel with the Center for Responsible Lending.
“The Department of Education and DeVos are more interested in shielding corporate actors like Navient and for-profit colleges from taking responsibility for their bad acts,” added Barkley-Denney. “Like the Attorneys General speaking out against this latest development, we remain dedicated to standing up for students, and urge DeVos to remember who she was appointed to serve.”
Charlene Crowell is the communications deputy director with the Center for Responsible Lending. She can be reached at email@example.com.