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Lawmakers challenge DeVos on student loan enforcement

Charlene Crowell | 9/27/2017, 3:36 p.m.
Civil rights leaders and Capitol Hill lawmakers are standing up and speaking out against a recent Department of Education (DOE) ...

Civil rights leaders and Capitol Hill lawmakers are standing up and speaking out against a recent Department of Education (DOE) decision to sever its working relationship with the Consumer Financial Protection Bureau (CFPB). In separate and independent actions, Education Secretary Betsy DeVos and staff are being challenged and corrected as to its understanding of a sole office having complete authority and enforcement regarding the nation’s student loans.

As readers may recall, an earlier column reported on an August 31 advisory by the Department of Education’s decision to formally end two Memorandums of Understanding (MOUs) that guided Education’s working relationship with CFPB. The first MOU detailed how DOE would share information with CFPB. The second detailed how the two agencies would cooperate on supervisory oversight, the process that has led to multiple million dollar settlements for fraud and other legal violations. For CFPB, the correspondence was an unexpected 30-day cancellation notice.

It was also one that affects more than 40 million consumers, who together owe $1.4 trillion in a combination of federal and private student loan debt. Among Black students who used student loans to finance a bachelor’s degree, the burden of debt is disproportionate. Four years following graduation, they owe almost double the amount of their white classmates, according to research by the Center for Responsible Lending (CRL).

Since then, reactions have ranged from questioning the advisability as to why DOE would cut its ties to CFPB, to outright challenges to the agency’s knowledge and interpretation of applicable federal laws.

For example, 10 members of the Congressional Black Caucus joined with other Capitol Hill lawmakers in a bicameral effort that represented 18 states to challenge in a September 15 letter to Secretary DeVos that advised the department’s “assertions are false.” Led by Senators Sherrod Brown of Ohio and Patty Murray of Washington, the correspondence was a direct challenge.

“While the Department does have the authority to administer the federal student loan programs,” wrote the lawmakers, “that authority is not exclusive and has been intentionally constrained by law due to the Department’s historical negligence in carrying out many of its oversight responsibilities over federal student loan servicers.”

“Congress also established a Student Loan Ombudsman at the CFPB whose responsibilities include working with the Department to ‘resolve complaints related to [borrowers] private education or federal student loans’ and is specifically instructed to enter into a MOU with the Department to do so,” the letter continued.

The lawmakers also advised in their letter that the authority to monitor and enforcement laws affecting student loan servicers beyond those held by CFPB additionally includes duties for the Federal Deposit Insurance Corporation (FDIC), Securities and Exchange Commission (SEC) at the federal level and in the states by attorneys general and other state agencies.

"We are pleased to see Senators Brown and Murray are joined by more lawmakers in leading the way to assert CFPB’s authority and that of other federal agencies that together share oversight and regulation of student loans and student loan servicers”, commented Whitney Barkley-Denney, a CRL policy counsel and student loan specialist. “The claims made by the Department of Education made in signal a disturbing intent to withhold key information that should be shared.”