ED Terminates Student Loan Data-Sharing Partnership With Consumer Watchdog

The Department of Education (ED) will no longer participate in a data-sharing partnership with the Consumer Financial Protection Bureau (CFPB) regarding oversight of federal student loans, saying that the CFPB’s actions have "undermined" the mission of the Department to oversee the student loan program and protect borrowers, according to an August 31 letter sent to CFPB Director Richard Cordray.
The letter outlines ED's decision to terminate two Memorandums of Understanding (MOUs) enacted under the Obama administration. The first MOU, referred to in ED's letter as the Sharing MOU and dated October 19, 2011, allowed ED and CFPB "to collaborate to ensure coordination in providing assistance to and serving borrowers seeking to resolve complaints related to their private education or Federal student loans. The second MOU, referred to as the Supervisory MOU and dated January 9, 2014, supplemented the first MOU regarding certain kinds of information sharing to allow the two agencies to “cooperate in connection with their respective student financial services oversight and supervisory activities.”
However, CFPB’s actions have “undermined” ED’s mission to serve students and borrowers and “violat[e] the intent of the MOUs,” according to the letter. In particular, the letter alleges CFPB has handled complaints related to the Title IV federal student loan program, rather than directing them to ED within 10 days as outlined in the Sharing MOU. 
ED said in its letter that it “takes exception” to the CFPB’s expansion of its oversight role to include federal student loan servicers, for which the Department says it has “full oversight responsibility.”
“It is the Department’s role to work with federal student borrowers to ensure that their issues are addressed within the rules applicable to this program,” according to the letter. “The CFPB’s intervention in this area adds confusion to borrowers and servicers who now hear conflicting guidance related to the Title IV student loan services for which the Department is responsible.”
The CFPB is “using the Department’s data to expand its jurisdiction into areas that Congress never envisioned,” rather than helping ED to fulfill its duties related to the federal student loan program,” the letter alleges. “This latest expansion is characteristic of an overreaching and unaccountable agency, and it has led the Department to terminate the MOUs in order to ensure fair and consistent enforcement of Title IV requirements and the efficient resolution of borrower complaints.”
The MOUs will terminate within 30 days of the date of the letter.
In a statement to Inside Higher Ed, a Department spokesperson said that the MOUs “allowed the CFPB the expand its jurisdiction into areas Congress never intended,” which “created unnecessary confusion for both borrowers and servicers. Terminating the MOU will allow the Department to maintain full oversight responsibility for federal student loans, as Congress intended, while maintaining its commitment to serving borrowers and putting the needs of students above all else.”
House Committee on Education and the Workforce Chair Virginia Foxx (R-NC) said in a statement that she is “pleased that the department is taking its authority back from the CFPB, and remains committed to serving borrowers and students first.”
“The Department of Education has made it clear that its partnership with the CFPB is doing more harm than good when it comes to how it can best serve students and borrowers,” Foxx said in her statement.
The letter comes at a time when student loan servicer Navient is facing a lawsuit from CFPB, which accuses the servicer of “systematically and illegally failing borrowers at every stage of repayment,” according to a press release from CFPB. It is unclear how terminating the MOUs will impact the lawsuit against Navient, which has strongly denied any wrongdoing.


Publication Date: 9/1/2017

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