Student Loan Industry Clashes With 25 States Over Probes

Source: Erik Larson and Shahien Nasiripour, Bloomberg, October 24, 2017
 
The U.S. student loan industry is trying to dodge state investigations into allegedly abusive practices by claiming they’re preempted by federal law, a bipartisan group of attorneys general claimed.  At least two national industry groups asked the Department of Education this year to issue formal guidance barring probes by states, arguing they duplicate federal efforts and needlessly expand regulations, according to copies of the letters obtained by Bloomberg News.  Half the nation is balking. Twenty-five states including Texas, New York, Kansas and California on Tuesday urged Education Secretary Betsy DeVos to reject the requests, arguing that state probes have been effective in returning tens of millions of dollars to borrowers in recent years. …

Related:
Loans ‘Designed to Fail’: States Say Navient Preyed on Students
Source: Stacy Cowley and Jessica Silver-Greenberg, New York Times, April 9, 2017
 
In recent months, the student loan giant Navient, which was spun off from Sallie Mae in 2014 and retained nearly all of the company’s loan portfolio, has come under fire for aggressive and sloppy loan collection practices, which led to a set of government lawsuits filed in January. But those accusations have overshadowed broader claims, detailed in two state lawsuits filed by the attorneys general in Illinois and Washington, that Sallie Mae engaged in predatory lending, extending billions of dollars in private loans to students like Ms. Hardin that never should have been made in the first place. …

Navient Lawsuit Shatters GOP Privatization Myth
Source: David Dayen, The American Prospect, January 19, 2017

The Trump era is likely to usher in rapid privatization of public goods and services. … Behind these plans to sell off the public sector lies a philosophy that private enterprise can perform government roles more cheaply and efficiently. Perhaps nothing shatters this myth more than a lawsuit filed Wednesday against Navient, a company that administers payments on student loans. The Consumer Financial Protection Bureau (CFPB) and state attorneys general in Illinois and Washington state accuse Navient of “systematically and illegally failing borrowers at every stage of repayment,” using “shortcuts and deception” to rip off students. … Navient committed these alleged violations in part while fulfilling a federal contract for work that could indisputably have been performed by the public sector. … According to the complaint, Navient failed to correctly allocate borrower payments across multiple loans, sometimes ringing up late fees and defaults even when the borrower made the payment. The company steered borrowers into forbearance plans (a temporary break from payments) that increased interest due, rather than other repayment options. The CFPB estimates that $4 billion in unnecessary interest charges piled up on borrower accounts from 2010-2015 because of this. … The CFPB added that Navient gave student borrowers incorrect information for how to maintain eligibility for income-based repayment plans, which only take a sliver of a borrowers’ income every month. … But the Navient lawsuit doesn’t just reinforce why we need the CFPB. It shreds the argument for privatization, particularly of functions the government is perfectly capable of doing on its own. We could easily route student loan payments right to Uncle Sam. But instead, we push them through a predatory actor that needs to commit harm to make it worthwhile. …