States can sue federal student loan officers, says Department of Education


In its latest move to reverse Trump-era policies, the Education Department said on Monday that states were free to monitor federal student loan services that violate local consumer protection laws, reversing thus its previous legal position.

“Effective collaboration between states and the federal government is the best way to ensure that student loan borrowers get the best possible service,” Education Secretary Miguel A. Cardona said in a statement announcing the change. .

The federal government pays seven vendors to collect payments from nearly 43 million borrowers on $ 1.4 trillion in federal student loans. Auditors from the government and other watchdogs have repeatedly criticized companies for shoddy practices and mistakes that they say hurt troubled borrowers and increased repayment costs for many people.

Several state attorneys general have sued federal loan officers for their missteps. In 2018, Betsy DeVos, the Education Secretary to former President Donald J. Trump, sought to block these lawsuits, arguing that only the federal government had the power to oversee and punish its federal loan officers.

Several federal judges viewed this position with skepticism. In at least four cases, federal district or appeals courts have ruled against the department and found that states retain certain enforcement rights over the actions of duty officers towards residents of their state.

The Department of Education cited these decisions in new orientation explaining his overthrow and said that working collaboratively with states instead of fighting against them “could produce a more robust oversight and enforcement system to monitor and improve performance under this extended system.”

Maura Healey, Attorney General of Massachusetts, praised the new position. His office took legal action and later settled with, the government’s largest loan manager due to mistakes she says have hampered public service workers seeking to use a loan forgiveness program. (That agent, the Pennsylvania Higher Education Assistance Agency, known to most borrowers as FedLoan, plans to terminate its contract with the government at the end of this year.)

“States have long played a critical role in overseeing higher education and have been at the forefront of protecting student borrowers from fraud and abuse,” said Healey. “My office looks forward to working with the ministry to ensure the accountability of service officers and the rights of borrowers. “

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