Secretary DeVos Expected to Ban States From Protecting Student Loan Borrowers

On Monday it was reported that Betsy DeVos’ Department of Education may soon announce a proposal to limit the ability of states to regulate or litigate against student loan companies. Under this new directive the Department would declare that states do not have the authority to regulate federal student loan servicers, and that only the federal government has the right to do so. While this statement is expected to be made public soon, it is not surprising.

One of the first actions Secretary DeVos took after being narrowly confirmed as Secretary was rolling back key regulations that protected borrowers with federal student loans. DeVos rescinded basic requirements for customer service and loan management that protected the rights of borrowers. In light of this action, multiple states have stepped up to ensure that large student loan companies like Navient, NelNet, Great Lakes, and others, do right by federal loan borrowers.

Given Secretary DeVos’ family connections to debt collection, her siding with loan companies over students is to be expected. This latest move is not just another example of the Trump swamp in action, it is also legally dubious.

States have a right to protect their citizens from the bad behavior of companies. States currently regulate mortgage lenders, federally contracted debt collectors, and other financial service companies using their licensing authoritystudent loan companies are no different. Student loan companies have already been under investigation by multiple states for activities that violate the rights of borrowers. Loan repayment becomes more difficult for borrowers when predatory companies incorrectly process payments, fail to notify them of loan transfers, and push them into forbearance instead of programs like income-driven repayment. Student loan default is a financial catastrophe for borrowers, and bad behavior from servicers can lead to borrowers going into default. States have a right and an obligation to investigate and regulate this behavior, protect borrowers, and ensure that their citizens can live financially sound lives that contribute to state and local economies.

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