September 9, 2019; NBC News
NPQ has long followed the fate of the federal Public Service Loan Forgiveness program. Almost a dozen articles have focused on the program that forgives student loans after ten years for those working in certain public and nonprofit jobs—how it is supposed to work, and the ways it hasn’t. Now, the story turns to a government agency refusing to work with other state and federal agencies to the detriment of thousands of borrowers.
First, an update to the numbers: Ninety-nine percent of those applying for loan forgiveness (that is, 99 percent of 54,184 applications) have been denied. Most are denied because borrowers checked the wrong box on the menu of repayment plans on their loan servicer’s website. As Zack Friedman, writing for Forbes, reports that, “From May 2018–2019, only 661 completed requests received a total of $27 million of student loan forgiveness, which is less than four percent of the $700 million that Congress allocated for this expanded program.” It is so bad that there is now a program, the Temporary Expanded Public Service Loan Forgiveness program, where those denied can reapply.
Now, it appears that the US Education Department is working on behalf of the companies servicing the loans. Law enforcement agencies have requested student loan information from many states in order to investigate business practices of those loan servicers. The Education Department has refused, rejecting years of precedent.
Kathleen Kraninger, the director of the federal Consumer Financial Protection Bureau (CFPB), wrote a letter to US Senator Elizabeth Warren (D-MA) in April, saying the CFPB could no longer do its job since “student loan servicers have declined to produce information.” CFPB started its collection of tens of thousands of complaints about student loan servicers, both federal and private, during the Obama administration.
Correspondence and documents from the Education Department to the Senate education subcommittee have been obtained by NBC News. “It’s a brazen act of lawlessness,” says Christopher Peterson, a law professor at the University of Utah and former enforcement lawyer at the CFPB. “I think they are overinterpreting what their authority is to stop law enforcement.”
The top adviser to Education Secretary Betsy DeVos, Diane Auer Jones, sent a letter to two Democratic members of Congress in June, stating “We no longer grant such requests for nonconsensual disclosure of records from entities purporting to exercise regulatory or enforcement power.” This policy is based on a new interpretation of federal law. The Education Department has decided to reinterpret the Privacy Act of 1974, which has guided the disbursement of information on students for 40 years:
We removed a routine use from the [Customer Engagement Management System] [Modified System of Records Notice] permitting us to disclose records for use by other law enforcement agencies because we were concerned that the use of such records by law enforcement agencies to investigate or prosecute violations of the law or to otherwise enforce the law might not be compatible with the purposes of the FSA Ombudsman in collecting the records.
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While the department denies that the policy to prevent data-sharing with law enforcement agencies is absolute, in March 2018, it still announced it preempts state regulations when it comes to the nine student loan servicers federally contracted.
The Student Loan Servicing Alliance (SLSA), the trade organization that represents student loan servicers approves of the new procedure, calling it “not just good law [but] good policy.”
Over 20 state attorneys general, ranging from New York to Hawaii, object to that determination, as they informed DeVos in a joint letter: “The State Attorneys General are in a unique position to ensure that the servicers are conducting their businesses in compliance with consumer protection laws and have been active in enforcing state consumer protection laws against servicers.”
Washington’s senator Patty Murray (D) was one of those who received the letter from Jones. She’s convinced the Department of Education has prioritized loan servicers and not borrowers, noting that servers could lose billions of dollars should the loans be forgiven. Right now, student loan servicers are enjoying high levels of profit. Even Navient, which has faced federal and state lawsuits, nearly doubled its profits in 2019’s second quarter compared to 2018.
Murray declared, “After nearly a year of hiding the truth, Secretary DeVos’ Department of Education finally admitted that it is interfering with law enforcement in order to protect predatory student loan servicers and debt collectors instead of making sure student loan borrowers get treated fairly.”
The state attorneys general have taken a stand to protect student borrowers. It appears those that are fighting against them includes the US Education Department.—Marian Conway
Disclosure: This author is enrolled in the federal Public Service Loan Forgiveness program.