Education department blocking state investigations of student loan companies

The Department of Education has come under fire for “shielding” student loan companies from state law enforcement officials and federal regulators who accuse the companies of misleading borrowers, POLITICO reports. Some of the nation’s largest student loan companies, like Navient, are facing lawsuits alleging that they have misinformed and overcharged borrowers.

Blocking access to student loan information

The Consumer Financial Protection Bureau (CFPB)—as well as state attorneys general in Illinois, Washington, Pennsylvania, California, and Mississippi—have all brought about lawsuits against Navient. However, the Trump administration has told student loan companies not to comply with any demands or requests for information from the attorneys general, citing privacy laws. Earlier this year, DeVos said states do not have the authority to hold accountable companies that service federal student loans, but “her latest actions go much further, actively cutting off key information and data,” according to POLITICO.

FedLoan Servicing, another student loan servicer, has similarly benefited from the Department of Education’s attempts to thwart state investigations. Massachusetts Attorney General Maura Healey, who is suing the servicer for “deceptive practices,” told POLITICO in a statement that “The U.S. Department of Education is actively undermining my office’s efforts to hold shoddy loan servicers accountable.” Healey continued, “Secretary DeVos should be helping students pursue an education, not stonewalling critical state investigations.”

Critics lament further weakening of consumer protections

The Department of Education, meanwhile, has cited federal privacy laws in explaining the decision to block access to student loan records. According to an education department spokesperson, the agency is “working to ensure the proper administration of a federal program, and protect student privacy, not throw up roadblocks or protect any individual student loan servicer.”

Seth Frotman, the CFPB’s former student loan ombudsman, disagrees. He recently resigned in protest, alleging that the Trump administration “has turned its back on young people and their financial futures.”

Others have voiced similar concerns. “It looks like the administration is simply shielding these companies from liability,” Persis Yu, director of the National Consumer Law Center’s Student Loan Borrower Assistance Project, told POLITICO. “The boost to big business can’t be understated here. The administration is doing exactly what the industry is asking of them.”

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