Biden changes Trump’s policy on regulating student loan service companies

  • The Education Department revised a Trump-era policy that prevented states from regulating student loan companies.
  • The new rule will allow states to better protect borrowers and hold officials accountable.
  • Advocacy groups have applauded the move as a step towards better oversight of the student loan system.

Under President Donald Trump, there was only one watchdog on the pace of student loans, and that was the federal government. President Joe Biden just changed that to give states a stake in the matter.

On Monday, the Education Department announced in a press release that it had revised and clarified a position under Trump that prevented states from regulating student loan companies. The new legal interpretation under Biden will help states enforce Borrower Bill of Rights and other similar laws to address loan servicing issues, and strengthen states’ capacities to facilitate the oversight of student loan companies. that the Secretary of Education, Miguel Cardona, declared “will clarify [for] the relationship between federal and state laws on this issue.

The new interpretation will take effect this week and the public will have 30 days to submit comments on any further changes needed.

“States have long played a pivotal role in overseeing higher education and have been on the front line in protecting student borrowers from fraud and abuse,” Massachusetts Attorney General Maura Healey said in a statement. . “We applaud Secretary Cardona for rejecting the previous interpretation which incorrectly represented state authority and emboldened bad actors.”

Insider reported last month that all 50 states urged Cardona in a letter to repeal Trump-era policies that prevented states from regulating student loans, the Conference of State Bank Supervisors and the North American Collection Agency Regulatory Association calling Trump’s advice “reckless.” and misguided. “

In 2017, more than half of the 50 states proposed or passed legislation to regulate student loan services. But Trump’s Education Department changed that with a memo that said the Privacy Act of 1974 prevented student loan departments from providing documents to state regulators unless the department does not approve. A 2018 advisory from Trump’s department followed, isolating student loan services from any kind of state regulation.

Following Cardona’s announcement on Monday, a number of organizations working to protect borrowers have applauded the department’s decision. The Student Defense, which works to advance students’ rights to higher education, said the new notice “could lead to long-awaited accountability and justice for students.”

“We hope this decision indicates that the Department of Education is preparing to expand liability for student loans and better protect student borrowers from fraud – especially during our recovery from the pandemic,” Dan Zibe said. , vice president of student defense and chief counsel. .

And Student Borrower Protection Center executive director Seth Frotman said in a statement that the new rule ended “a multi-year campaign by the student loan industry to obstruct justice – a project undertaken with voluntary participation. of the Trump administration “.

Massachusetts Senator Elizabeth Warren has also been a leading lawmaker in favor of tighter oversight of student loan companies, telling Insider last month that “the world has changed for student loan administrators” after two companies shut down their services in two weeks.

Source link


About Author

Leave A Reply