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Attorney General Xavier Becerra: It’s Foolish To Roll Back Student Loan Servicing Reforms

Monday, April 24, 2017
Contact: (415) 703-5837, agpressoffice@doj.ca.gov

U.S. Department of Education is Rolling Back Reforms Designed to Help Students Avoid Default, Curtail Loan Servicer Misconduct

SACRAMENTO– California Attorney General Xavier Becerra today called out the U.S. Department of Education for abdicating its responsibility to millions of student loan borrowers and their families across the country. Today’s multistate letter opposes action by the Department of Education to revoke critical reforms designed to help students avoid default and curtail loan servicer misconduct. Joined by 20 attorneys general and the Office of Consumer Protection of Hawaii, the letter to Education Secretary Betsy DeVos opposes the Department’s recent rollback of guidance intended to protect student loan borrowers and reform the student loan servicing industry.

“Through a college education, students work hard to reach their American dream, but many are held back by debilitating student loan debt,” said Attorney General Becerra. “Now the Department of Education is rolling back guidance that helps protect students and reduces abuse by loan servicers. The California Department of Justice is committed to protecting students who take out loans and strongly opposes any action that favors the interests of loan servicers over students and families.”

The guidance, issued by the Department of Education last year, would have helped borrowers get accurate information about their loans and repayment options, improved the consistency of service provided by student loan servicers, increased servicer accountability and enhanced transparency. Critically, these reforms would have improved borrowers’ access to affordable loan repayment plans designed to help borrowers in distress avoid default. But the Department’s action earlier this month has instead left student loan borrowers vulnerable to poor practices and abuses that the servicing reforms were intended to prevent.

Borrowers struggle under the weight of their student loan debt and federal student loan default rates are on the rise. In 2015, the Consumer Financial Protection Bureau (CFPB) estimated that more than 25 percent of student loan borrowers were delinquent or in default on a student loan.

“Many such borrowers would benefit greatly from entering income-driven repayment plans but are prevented from doing so by student loan servicer misconduct and misinformation,” the letter states.

Joining today’s letter are the attorneys general of Massachusetts, Illinois, California, Connecticut, Hawaii, Iowa, Kentucky, Maine, Maryland, Minnesota, Mississippi, New Mexico, New York, North Carolina, Oregon, Pennsylvania, Rhode Island, Vermont, Virginia, Washington, and the District of Columbia, as well as the Executive Director of the Office of Consumer Protection of Hawaii.

A copy of the multistate letter sent to Education Secretary Betsy DeVos is attached to the electronic version of this release at oag.ca.gov/news.

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