Today Attorney General Mark R. Herring and a coalition of state attorneys general sent a letter to U.S. Department of Education Secretary Betsy DeVos, demanding that the Department of Education stop its systematic rolling back of critical protections for student loan borrowers.
At issue is the Department of Education decision to terminate two key memoranda of understanding it had with the Consumer Financial Protection Bureau (CFPB) on critical protections designed to streamline the supervision of student loan servicers.
“There are more than 1 million student borrowers in Virginia who have a total of more than $30 billion in outstanding student loan balances, and we should be doing everything we can to ensure they are protected from deceptive practices by federal loan servicers and for-profit schools,” said Attorney General Herring. “Students and their families should be able to rely on the Department of Education to be looking out for their best interests, but Secretary DeVos and her department are helping borrowers and lenders take advantage of Virginians. I promise not to stand idly by as these critical protections are rolled back, and I’ll continue to stand up and fight for Virginia students and their families.”
The letter to Secretary DeVos, written by a coalition of 19 state attorneys general, finds three main faults with a letter sent in August by the Department of Education to the CFPB, in which the Department terminated two key memoranda of understanding it had with the 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 CFPB 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 attorneys general’s letter highlights the strong work the CFPB 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 CFPB:
- Processing complaints from more than 40,000 student loan borrowers from all 50 states
- Suing Navient, the nation’s largest student loan servicer, with Washington State and Illinois 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
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 Attorney General Herring 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, Pennsylvania, Rhode Island, Vermont, and Washington, as well as the executive director of the Hawaii Office of Consumer Protection.
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