At least 21 attorneys general objected to Education Secretary Betsy DeVos’s rollback of certain student loan protections made during the Obama Era. These protections refer to processes, requirements and guidance that aim to improve servicing of federal student loans and work toward the interests of borrowers.
DeVos Writes to Withdraw
It all started with DeVos’s letter to James Runcie, chief operating officer of the Federal Student Aid, on April 11. In her letter, DeVos reiterated the ED’s goal in procuring student loan servicing capabilities “to provide high quality customer service to federal loan borrowers in a cost-efficient and effective manner.”
Apparently, said DeVos, the process was affected by “moving deadlines, changing requirements and a lack of consistent objectives.”
“We now find ourselves in a situation where we must promptly address not only these shortcomings but also any other issues that may impede our ability to ensure borrowers do not experience deficiencies in service. This must be done with precision, timeliness and transparency,” DeVos wrote.
Student Loan Protections
To that end, DeVos wrote to withdraw the following guidance “to negate any impediment, ambiguity or inconsistency” in the student loan servicing procurement process.
- A memorandum dated June 30, 2016, from former ED Secretary John King to Mr. Runcie
- A memorandum dated July 20, 2016, from former Undersecretary Ted Mitchell to Mr. Runcie
- An addendum dated October 17, 2016 to the July 20 memorandum.
The June 30 letter discusses, among other things, the factors that must be weighed in the evaluation of prospective offerors or bidders. This evaluation should consider the quality of the product or service, prior experience, past performance of offerors, among others.
Meanwhile, the subsequent July 20 letter which included the Oct. 17 addendum for clarification, elaborated on the establishment of a transparent and accountable loan servicing ecosystem. This unified platform will hold all loan accounts held by ED, and multiple customer servicer providers will handle call volume to provide “state of the art borrower engagement”.
The ED’s loan servicing policy will be governed by these five pillars: (a) economic incentives and baseline borrower protections, (b) directives including baseline standards for at-risk borrowers, (c) consistency in servicing functions and adequate and timely communications, (d) accountability of servicers, and (e) transparency of the servicers’ performance and assistance such as income-driven plans.
The coalition headed by Massachusetts AG Maura Healey wants DeVos to restore critical reforms “intended to protect student loan borrowers and reform the student loan servicing industry.” The ED’s action, according to the coalition, has the effect of leaving “student loan borrowers mired in ambiguity and inconsistency that the servicing reforms were intended to prevent.”
Complaints against student loan servicers are rife with Navient, one of the largest student loan servicers, sued by the CFPB in January over alleged misconduct. Navient allegedly failed to assist struggling borrowers with their student loans, steering them towards forbearances when they are income-based repayment plans.
“At a time when the need for common-sense federal student loan servicing is undeniable, the Department’s decision to roll back essential protections imperils millions of student loan borrowers and families,” Healey and 20 other state attorneys general said in their April 24 letter.