By Seth Frotman and Tamara Cesaretti | October 6, 2020
Millions of Americans with student debt, including teachers, military families, borrowers with disabilities, and older adults, continue to be cheated by student loan companies. These companies pad their profits while adding billions of dollars in additional and unnecessary student debt onto the backs of struggling borrowers.
Over the last four years, Education Secretary Betsy DeVos has engaged in an unprecedented campaign to shield the student loan industry from the consequences of these widespread abuses. The Administration has repeatedly sided with some of the largest financial companies in America, rather than supporting efforts by law enforcement officials and regulators to protect borrowers and hold the industry to account.
Borrowers deserve better.
That is why today we are releasing a new report offering a roadmap to reverse the damage done by the Trump Administration—ending its years-long scheme to obstruct consumer protection efforts at every level of government.
The United States Departments of Education and Justice have used a series of policy and legal tools to bring the full weight of the federal government to bear on behalf of the student loan industry, impeding the efforts of state and federal consumer protection officials to protect borrowers. And, in courts across the nation, the Trump Administration has supported student loan companies’ efforts to escape accountability for abuses and deny borrowers’ justice when industry breaks the law. Together, these actions have made tens of millions of student loan borrowers across the country vulnerable to abuse.
Widespread corruption is the hallmark of the student debt crisis in the Trump Era, but it doesn’t have to be this way.
Our new report outlines a series of immediate actions that a future administration must take to reverse this damage and offers a new vision for how the federal government can protect student loan borrowers. For example, beginning on day one, a new administration must:
- Reaffirm that state consumer laws protect student loan borrowers and are not preempted by federal law. In 2018, Secretary DeVos published a legally dubious “interpretation” of the Higher Education Act, purporting to block a wide range of state consumer protection laws. A new administration must immediately reverse course, reverting to the historic, bipartisan view that states’ police powers can and must be brought to bear to halt abuses by the student loan industry.
- End the obstruction of state consumer protection officials’ examinations, investigations, and litigation. In 2017, ED’s Office of Federal Student Aid issued a memorandum instructing the government’s contracted student loan servicers to refuse demands for documents and records when made by independent regulators and law enforcement officials. A new administration must withdraw this memorandum and clear the way for robust independent oversight over the companies that service more than $1.4 trillion in student debt.
- Immediately release all documents and records withheld from regulators and enforcement officials. The 2017 memorandum described above has obstructed government efforts to police illegal practices by student loan companies. A new administration must immediately instruct the student loan industry to produce any documents or records withheld from government officials.
- Unwind the Justice Department’s intervention on the side of industry in consumer protection litigation. At key points in high-profile consumer protection lawsuits, the U.S. Department of Justice weighed in on the side of the student loan industry, objecting to robust independent oversight by state officials. A new administration must immediately halt this practice, instead advising courts of the federal government’s return to its historic support for independent oversight and enforcement.
In addition to these immediate actions, a future administration must use every tool at its disposal to restrain and rebuke student loan companies that assert that they need not follow state or federal consumer protection laws. Too often, the student loan companies claim immunity from prosecution based on their status as government contractors—a practice that a new administration should immediately outlaw, making clear that no one is above the law.
Our report also offers a set of concrete steps to ensure law enforcement officials and regulators at every level of government can work with a future administration to police industry abuses across the $1.7 trillion student loan market. These additional executive actions include establishing a new federal Student Borrower Bill of Rights to create new rules for the student loan industry and creating a first-of-its-kind intergovernmental task force to police racial discrimination in the student loan market and vigorously enforce federal fair lending laws.
Much work needs to be done to end the student debt crisis. The actions outlined in our new report are critical first steps to undo the widespread damage caused by Secretary DeVos and President Trump. By following this roadmap, a new administration can begin to repair a badly broken student loan system and protect millions of Americans with student debt.
Following the release of this report, join us on Wednesday, October 7th for a conversation with California Attorney General Xavier Becerra on the future of student debt, what states are doing to protect borrowers, and actions Washington must take in 2021.
Seth Frotman is the Executive Director of the Student Borrower Protection Center. He previously served as Assistant Director and Student Loan Ombudsman at the Consumer Financial Protection Bureau, where he led a government-wide effort to crack down on abuses by the student loan industry and protect borrowers.
Tamara Cesaretti is a Counsel at the Student Borrower Protection Center. Prior to joining the SBPC, Tamara was a civil rights policy advocate for both educational opportunities and economic justice at the Lawyers’ Committee for Civil Rights Under Law.