Democratic Leaders Concerned About ED’s Management of Federal Student Loans

By Joelle Fredman, NASFAA Staff Reporter

Following a series of actions the Department of Education (ED) has taken in recent months regarding student loan servicing—and a report from the agency’s Office of Inspector General (OIG) that pointed to potential flaws in its oversight of servicers—several Democratic leaders in the House of Representatives are questioning ED’s intentions.

Earlier this year, ED’s OIG published a report that questioned the agency’s oversight of federal student loan servicers, specifically noting that between January 2015 and September 2017, service representatives did not sufficiently inform borrowers of all their available repayment options, and incorrectly calculated income-driven payment amounts, among other issues. 

On the heels of that report, and a series of other actions taken by ED, House Education and Labor Committee Chairman Rep. Bobby Scott (D-VA), Financial Services Committee Chairwoman Rep. Maxine Waters (D-CA), and Oversight and Reform Committee Chairman Rep. Elijah Cummings (D-MD) wrote a letter Tuesday to Education Secretary Betsy DeVos to express concern about the student loan industry and request ED’s rationale behind recent policy decisions involving loan servicers.       

“As chairs of committees with oversight responsibilities over the student loan industry, we are very concerned by reports that under your leadership, [ED] has failed to adequately oversee student loan servicers and has instead shielded these companies from oversight from federal and state law enforcement, including the Consumer Financial Protection Bureau (CFPB),” they wrote. 

The lawmakers wrote they were concerned because ED “obstructed state law enforcement” by prohibiting loan servicers since 2017 from responding to requests from law enforcement and instead directing them to send those inquiries to ED. Since then, however, ED has not approved any requests for information, and in June 2018 issued a notice in the Federal Register announcing that it “no longer intends to disclose any records for use by other law enforcement agencies.”

A request for information about the notice from Sen. Patty Murray (D-WA) and Rep. Rosa DeLauro (D-CT) in February has gone unanswered.    

“As a result of this obstruction, Congress lacks key information about [ED’s] efforts to shield servicers from federal and state law enforcement.”

The lawmakers also wrote that ED’s decision to end its data-sharing partnership with CFPB in 2017, by terminating two Memoranda of Understanding (MOUs) enacted under the Obama administration, violated a legal requirement to maintain MOUs. They added that ED’s rationale for doing so—that CFPB handled complaints related to the federal student loan program, rather than directing them to ED within 10 days as outlined in one MOU—“appears to be no more than a pretext.”

In addition to requesting more information about ED’s decisions regarding CFPB, the lawmakers also requested that ED describe its position on federal preemption, as it relates to federal loan servicers. They asked ED to describe whether it applies to state agencies enforcing federal laws, and to outline instances in which state laws have conflicted with federal requirements for servicers, which it mentioned in a notice in the Federal Register last year.    

The chairs also sent a sent a letter Tuesday to CFPB Director Kathleen Krangiger requesting other information about the bureau, and three federal loan servicers—Navient, Nelnet, and the Pennsylvania Higher Education Assistance Agency (PHEAA)—asking for information about their strategies and policies. 

 

Publication Date: 8/16/2019


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