AG Fox Joins Bipartisan Coalition Urging Congress to Reject Legislation Blocking State Oversight of Student Loan Servicing Industry
HELENA – Attorney General Tim Fox today joined a bipartisan coalition of 30 Attorneys General in a letter to Congressional leadership, calling for preservation of state oversight of the student loan industry. In the letter, the attorneys general urge Congress to reject legislation blocking states from preventing and combatting fraud and abuse by student loan providers.
“State oversight of the student loan industry is a critical safeguard protecting against fraudulent and abusive behavior,” Attorney General Fox said. “I stand with my colleagues in opposition to any proposal to reduce state consumer protection authority in an industry with a history of deceptive tactics.”
America faces 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. 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.
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 letter urges Congress to strip the language from House bill and to omit it from consideration in the Senate.
This follows a similar bipartisan effort in October, in which state officials from across the United States called on the U.S. Department of Education to reject improper industry requests efforts to achieve similar results.
Major state-led investigations of student loan abuses have recently included:
- Education Management Corporation: The investigation uncovered that the school misled students about program costs, graduation rates, and job placement rates. As part of the multi-state settlement, State Attorneys General obtained over $100 million in loan forgiveness.
- Corinthian Colleges: 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.
The letter was led by New York Attorney General Eric Schneiderman and Colorado Attorney General Cynthia Coffman, and signed by the Attorneys General of New York, Colorado, California, Connecticut, Delaware, Hawaii, Illinois, Iowa, Kansas, Kentucky, Maine, Maryland, Massachusetts, Minnesota, Mississippi, Montana, Nebraska, New Mexico, New Jersey, North Carolina, Oklahoma, Oregon, Pennsylvania, 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.