Biden administration revokes Trump rule on student loan oversight, paves way for investigationsSeptember 15, 2021
The Biden administration has revoked a Trump-era rule that consumer advocates argued allowed the Education Department to subvert state law enforcement probes of student loan servicers — one of a series of recent overhauls that could pave the way for more robust investigations.
In a new letter obtained by NBC News, a group of Democratic senators are expressing support for Education Secretary Miguel Cardona for the latest reversal that tightens oversight of the student loan servicing industry, but they also believe the department must go further to ensure states have the full backing of the federal government to hold loan companies accountable.
The Trump administration’s policy, posted in the Federal Register in March 2018, “interfered with state regulators exercising their authority to protect consumers in their states,” the eight lawmakers, led by Sen. Elizabeth Warren, D-Mass., and Sen. Sherrod Brown, D-Ohio, wrote to Cardona.
The revised interpretation, which went into effect last month, “is not only legally sound, but will also have substantial benefits for borrowers,” the senators added. “State attorneys general have been at the forefront of oversight of student loan servicers in recent years, uncovering widespread patterns of misleading and abusive conduct and winning significant settlements for borrowers in their states.”
A Consumer Financial Protection Bureau report in June reaffirmed that servicers have “engaged in unfair acts or practices related to providing inaccurate monthly payment amounts to consumers after a loan transfer” and “regularly provided inaccurate information about eligibility for [Public Service Loan Forgiveness] or Direct Consolidation Loans, resulting in deceptive acts or practices.”
Roughly 43 million borrowers hold a ballooning $1.5 trillion in student loan debt, federal statistics show, with students of color more likely to take on such debt and disproportionately struggling to pay it back. Since President Joe Biden took office this year, he has wiped out nearly $10 billion worth of student loan debt, most recently for students enrolled in a for-profit college that was accused of malfeasance and closed.
However, advocates for student debt cancellation, including many Democratic senators, have called on Biden to use his federal authority to do more.
The recent policy change spearheaded by Cardona is a sharp reversal of the agenda undertaken by former Education Secretary Betsy DeVos, who was accused of putting the for-profit college industry and student loan servicers ahead of helping student borrowers.
Under DeVos, the Education Department had argued that the federal government’s oversight pre-empted state regulations when it came to policing the student loan industry, which Democratic lawmakers had said allowed the administration to essentially shield student loan servicing companies.
The Student Loan Servicing Alliance, a trade group, had defended the Trump administration’s interpretation, saying it was…