Betsy DeVos speaking at the CPAC.
A group of 25 state attorneys general sent a letter to Betsy DeVos, the Secretary of Education, urging her not to intervene in their issues involving student loan companies according to the Consumerist. During the past couple of years, many states - including Maine, New York, Illinois, California, and others - have tried regulating student loan servicers operating within state boundaries.
Recently, the National Council of Higher Education Resources (NCHER), a trade association representing the interests of these companies, initiated another letter to DeVos asking her to issue a guidance stating clearly that student loan firms were subject to regulation by the Department of Education and not the states.
According to the president of NCHER, James Bergeron, each state’s regulations were different to a degree, leading to confusions among the loan servicers and the student borrowers. Bergeron pointed out that the NCHER members have been working with over 44 million borrowers across the country, and the lack of unified legal framework prevented them from doing their job efficiently in the best interests of their clients.
The representatives of the loan companies also stated they were subject to highly-supervised regulations already, in the face of the Department of Education, the Federal Trade Commission, and the Consumer Financial Protection Bureau.
In their response, the attorneys general opposed the arguments by the trade association. In their view, it was beyond the scope of the Department of Education to oversee the activities of the student loan companies at a state level. They highlighted it was the primary role of the state to protect its citizens from fraudulent, unfair and deceptive practices.
Over the past couple of years, numerous local lawmakers imposed a number of different regulations requiring student loan companies to get state-valid licenses and cater more towards borrower instructions. These provisions also included filing paperwork to stay in line with the state laws.
For instance, the state lawmakers in Connecticut came up with an innovative legislation package. It included three main components - the setup of a clear plan for the borrower including the amounts due before signing a loan agreement. The last part included a required state registration of all borrowing companies wishing to operate in the state to ensure their compliance with the fundamental consumer protection laws.
Many consumer attorneys have advocated for years that the U.S. student loan industry needs urgent reforms. A recent report by the CFPB said that many borrowers complain of the lack of adequate and timely information regarding their loans and best options for repayment. The report concluded that one in four student loan borrower is experiencing difficulty with repayment, and the loan providers do not do enough to secure the best repayment plan for each client.
image copyright © Gage Skidmore