NY AG Schneiderman, CO AG Coffman Lead Bipartisan Coalition Of 30 AGs Urging Congress To Reject Legislation That Would Block State Oversight Of Student Loan Servicing Industry
Legislation Would Dismantle State Oversight of Student Loan Industry – Despite State AGs Critical Role in Holding Industry Accountable and Protecting Students from Fraud and Abuse
New York Attorney General Eric T. Schneiderman and Colorado Attorney General Cynthia H. Coffman recently led a bipartisan coalition of 30 Attorneys General in a letter urging Congress to reject legislation that would block states from preventing and combatting fraud and abuse by the student loan industry.
“Gutting state-level protections for students would be disastrous – putting the financial interests of the loan industry ahead of the welfare of student borrowers in New York and across the country,” said Attorney General Schneiderman. “States have a fundamental right to protect our residents from financial fraud and abuse. At a time when millions of Americans are struggling with student debt, we need more cops on the beat – not fewer. Our bipartisan coalition of Attorneys General is sending a clear message: the federal government should be working hand-in-hand with states to combat student loan fraud and abuses, not trying to sideline its state partners.”
Americans are facing a student debt crisis. As of the fourth quarter of 2017, U.S. borrowers owed an estimated $1.38 trillion in federal and private student loans—more than for auto loans, credit cards, or any other non-mortgage loan category.
In recent years, state Attorneys General have investigated significant, far-reaching abuses in the student loan industry and won settlements returning tens of millions of dollars to student borrowers.
However, the pending version of the Higher Education Act reauthorization (H.R. 4508, also known as the PROSPER Act), includes language to preempt state level oversight of private companies that originate, service, or collect on student loans. As drafted, the language attempts to immunize the student loan industry from the state-level enforcement and reforms underway across the country.
Describing the language as “an all-out assault on states’ rights and basic principles of federalism,” the letter urges Congress to strip the language from House bill and to omit it from consideration in the Senate.
The letter was led by New York Attorney General Schneiderman and Colorado Attorney General Coffman, and signed by the Attorneys General of New York, Colorado, California, Connecticut, Delaware, Hawaii, Illinois, Iowa, Kansas, Kentucky, Maine, Maryland, Massachusetts, Minnesota, Mississippi, Montana, Nebraska, New Mexico, New Jersey, North Carolina, Oklahoma, Oregon, Pennsylvania, Rhode Island, Tennessee, Utah, Vermont, Virginia, Washington, and the District of Columbia, as well as the Executive Director of the Hawaii Office of Consumer Protection.
This follows a similar bipartisan effort in October, led by Attorney General Schneiderman, in which state officials from across the United States called on the U.S. Department of Education to reject improper industry requests efforts to achieve similar results.
Major state-led investigations of student loan abuses have recently included:
- Education Management Corporation: The investigation uncovered that the school misled students about program costs, graduation rates, and job placement rates. As part of the multi-state settlement, State Attorneys General obtained over $100 million in loan forgiveness, including $2.3 million for New York students.
- Devry University: The investigation revealed that DeVry lured students with ads that exaggerated graduates’ success in finding employment at graduation and contained inadequately substantiated claims about graduates’ salary success. The FTC, Attorney General Schneiderman, and other state regulators obtained over $100 million in refunds and debt relief for former DeVry students.
- Corinthian Colleges: State attorneys general were critical in uncovering widespread misconduct at the now defunct Corinthian Colleges and working to obtain relief for repayment of their student loans for tens of thousands of defrauded students nationwide.
- Aequitas Capital Management: Based on findings that Corinthian Colleges partnered with Aequitas Capital Management, Inc. to offer predatory private student loans to Corinthian students, 13 states reached a settlement with Aequitas that provided $183 million in student loan relief for 41,000 students nationwide, including $2.4 million in loan relief for 350 New Yorkers.
- Navient Corporation: Attorneys General have brought actions against Navient, the largest servicer of federal student loans, and certain of its subsidiaries for engaging in deceptive student loan servicing practices. Other states continue to investigate Navient.