Attorneys General urge Congress to maintain student loan industry oversight

student-loans

 

HARRISBURG — Attorney General Josh Shapiro, with a bipartisan coalition of 30 Attorneys General, took action today to urge Congress to reject legislation that would block states from preventing and combatting fraud and abuse by the student loan industry.

“It is unacceptable that Congress is considering a proposal that strips away the authority of states to protect student borrowers in Pennsylvania and across the country,” said Attorney General Shapiro. “Our bipartisan coalition of Attorneys General is standing up to maintain state-level enforcement, stop predatory practices by student loan companies, and look out for students in our states. It’s more important than ever now for Attorneys General to have that authority.”

Attorney General Shapiro has been a leading Attorney General nationally on the issue of protecting student borrowers from predatory student loan providers. Attorney General Shapiro sued Navient, the largest servicer of federal student loans, for engaging in deceptive student loan practices. That lawsuit is pending in federal court in Pennsylvania. Other state Attorneys General continue to investigate Navient.

The pending version of the Higher Education Act reauthorization – H.R. 4508, also known as 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 coalition of Attorneys General sent letters today urging Congress to strip the language from the House bill and omit it from consideration in the Senate.

Americans are facing a student debt crisis. As of the fourth quarter of 2017, U.S. borrowers owed an estimated $1.38 trillion in federal and private student loans – more than for auto loans, credit cards, or any other non-mortgage loan category. Pennsylvanians collectively owed $64.5 billion in private and federal student loans in 2017, a four percent increase over 2016. The average student loan debt for Pennsylvania college graduates in 2016 was $35,759 – the second highest of any state in the nation.

In recent years, state Attorneys General have investigated significant, far-reaching abuses in the student loan industry and won settlements returning tens of millions of dollars to student borrowers. In addition to Attorney General Shapiro’s lawsuit against Navient, other major state-led investigations of student loan abuses included:

  • 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, including $6.7 million in debt relief for 1,200 Pennsylvanians who attended Everest Institute campuses in Bucks County, Pittsburgh and Indiana County.
  • Corinthian Colleges: Attorney General Shapiro and other 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.

“With a rising number of students burdened by loan debt or in default, state Attorneys General and states must retain the ability to hold loan servicers accountable when they harm student borrowers,” Attorney General Shapiro said. “I sued Navient, whose deceptive practices harmed student borrowers and put their own profits ahead of thousands of Pennsylvania families – and families across our country — struggling to repay student loans. If Congress and the Trump Administration won’t stand up to protect student borrowers, I will.”

In addition to Pennsylvania Attorney General Josh Shapiro, the letter [LINK] was signed by the Attorneys General of California, Colorado, Connecticut, Delaware, Hawaii, Illinois, Iowa, Kansas, Kentucky, Maine, Maryland, Massachusetts, Minnesota, Mississippi, Montana, Nebraska, New Mexico, New Jersey, New York, North Carolina, Oklahoma, Oregon, Rhode Island, Tennessee, Utah, Vermont, Virginia, Washington, and the District of Columbia, as well as the Executive Director of the Hawaii Office of Consumer Protection