State Regulators: Let Us Handle the Student Loan Industry
Pictured above is Attorney General Lisa Madigan, a prominent voice in student loan regulation, speaking with NEWL participants at the Thompson Center.
With student loan debt consistently in the news, it should not be surprising to hear about yet another controversy. Several companies in the US student loan industry attempted to dodge state regulations by appealing to the federal government. This move was met by a unified appeal from multiple state attorney general offices.
Twenty-five states including Texas, Kansas, California, and New York have sent letters and other correspondence to Education Secretary Betsy DeVos urging the federal government to refrain from interfering with state probes into the student loan industry.
The states involved asserted their right to initiate probes into student loan companies and student loan servicers, quoting positive results in the past. One example includes DeVry University, where $49 million was issued in refunds and loan forgiveness after a probe by several states and the Federal Trade Commission (FTC).
However, the Secretary did not only receive letters from the states. The National Council of Higher Education Resources penned a response that appealed to DeVos and the Consumer Financial Protection Bureau to take more control over the issues by doing away with state-level probes that simply replicate the federal efforts.
The impact of these developments on the average student loan borrower remains to be seen. For now, there hasn’t been an official response from the Department of Education over the matter.
Some believe that this dispute may become the cornerstone for the Trump administration’s strategy for dealing with the ecosystem that surrounds federal student loans. This would include student loan servicers, refinancing lenders, and debt collection agencies who have been working to collect the almost $1.4 trillion worth of student loan debt.
If the states are removed from responsibility of oversight in the student debt industry, the federal government would be solely responsible for regulating the student loan industry. A centralized oversight and regulation system could lead to several things.
For starters, it could offer companies a simpler way to do business with only one set of regulations to follow as opposed to multiple different sets of rules from different states. However, this could backfire if federal regulations are not well-tailored enough to encompass all aspects of the student loan industry.
Furthermore, relying on just one regulator could open the door for some companies to slip past oversight and regulations, potentially endangering and costing student loan borrowers. Advocates for states’ rights argue that allowing states to regulate the companies working in their borders is the best way to ensure that all student borrowers are protected.
image copyright © Kelsey McCoy