Legislation Would Dismantle State Oversight of Student Loan Industry – Despite Attorneys Generals’ Critical Role in Holding Industry Accountable and Protecting Students from Fraud and Abuse
Chicago —(ENEWSPF)—March 20, 2018
By: Rosemary Piser
Today, Attorney General Lisa Madigan, along with 29 other Attorneys General, sent a letter to Congress urging it to reject legislation that would block states from fighting fraud and abuse by the student loan industry.
Attorney General Madigan said at today’s announcement, “The objective of the PROSPER Act is to protect the profits of student loan companies. I will continue to fight for students and families impacted by the fraudulent and abusive practices of student loan servicers.”
According to a recent report by the American Federation of Teachers, an estimated 44 million Americans are struggling with nearly $1.5 trillion in student debt. This $1.5 trillion is more than the amounts owed for auto loans, credit cards, or any other non-mortgage loan category.
Madigan has investigated significant, far-reaching abuses in the student loan and for-profit school industries. These investigations have resulted in settlements returning tens of millions of dollars to student borrowers.
Madigan also led an effort to pass the Student Loan Bill of Rights in Illinois in order to stop the student loan servicing industry’s abuses that have made it more difficult and more expensive for Illinois borrowers to repay their loans.
However, the Attorney Generals argue that the pending version of the Higher Education Act reauthorization, i.e., 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 the House bill and to omit it from consideration in the Senate.
In a similar bipartisan effort in October, state officials from across the United States called on the U.S. Department of Education to reject improper industry requests to achieve similar results.
Madigan’s investigations of student loan abuses have recently included:
Navient Corporation: In January 2017, Attorney General Madigan sued Navient, one of the country’s largest student loan servicing companies, after her investigation of the company revealed widespread abuses and failures by the student loan industry to provide student loan borrowers with accurate information. Other states continue to investigate Navient.
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. In Illinois, Madigan secured over $11.6 million in debt relief for students impacted.
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, Attorney General Madigan and the other attorneys general obtained over $100 million in loan forgiveness. In Illinois, Madigan secured more than $3 million in loan forgiveness for Illinois students.
Aequitas Capital Management: An investigation found that Corinthian Colleges misrepresented graduates’ employment success in connection with some of its programs, making certain students eligible for discharge of their federal student loans managed by Aequitas Capital Management, Inc. The resulting multi-state settlement provided $183 million in student loan relief for 41,000 students nationwide.
Joining Madigan in sending the letter were the Attorneys General of California, Colorado, Connecticut, Delaware, the District of Columbia, Hawaii, Iowa, Kansas, Kentucky, Maine, Maryland, Massachusetts, Minnesota, Mississippi, Montana, Nebraska, New Mexico, New Jersey, New York, North Carolina, Oklahoma, Oregon, Pennsylvania, Rhode Island, Tennessee, Utah, Vermont, Virginia and Washington, as well as the Executive Director of the Hawaii Office of Consumer Protection.
A copy of the letter can be found here.
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