Issued on April 11, 2017
Secretary of Education Betsy Devos has rescinded guidances aimed at making it easier for borrowers to pay back their student loans, citing a financial responsibility to not only borrowers but taxpayers. The series of Obama Administration policy memos, instituted in the face of a wave of student loan defaults, strengthened consumer protections for borrowers by instructing loan servicers to follow certain guidelines aimed at““simplifying the repayment process, better protecting borrowers, and facilitating our oversight of servicing contractors.” This decision to rescind the guidelines comes as the Department of Education is facing $9 billion in budget cuts. LEARN MORE
Lawmakers and advocacy groups argue that since the government pays millions to the student loan servicers to manage about $1.2 trillion in loans, more regulations should be required of those contractors, not less.When left on their own, reports from the Government Accountability Office and the Consumer Financial Protection Bureau (CFPB) show that loan servicers often do not look out for the best interest of their borrowers. Naivent, a well-known loan servicer has been sued by Washington State and the CFPB for allegedly cheating borrowers out of their repayment rights. It has been said that due to Devos’ action, it is likely that Navient will still receive a new contract. Former Deputy Treasury Secretary Sarah Bloom Raskin said that Devos’ decision, which does reverse policies that Raskin had worked on, made without a substitute or clear reason, shows that the administration is placing the welfare of loan servicers above those of student borrowers. LEARN MORE
- Americans for Financial Reform – The AFR is a nonprofit organization made up of 200 civil rights, consumer, labor, business, investor, faith-based, and civic and community groups who are working to lay the foundation for a strong, stable, and ethical financial system.
- Student Loan Borrower Assistance Project – A project of the National Consumer Law Center, the SLBAP is a resource for borrowers, their families, and advocates representing student loan borrowers.
- Consumer Financial Protection Bureau – A U.S Government agency tasked with making sure that banks, lenders and others in the financial world, treat consumers fairly.
This brief was compiled by Cindy Stansbury. If you have comments or want to add the name of your organization to this brief please contact firstname.lastname@example.org.