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AG Kilmartin and Fellow Attorneys General Pen Letter Opposing the U.S. Department of Education's Rollback of Student Loan Servicing Reforms

Rhode Island Attorney General Peter F. Kilmartin today joined a multistate letter calling out the U.S. Department of Education for abdicating its responsibility to millions of student loan borrowers and their families across the country by revoking critical reforms designed to help students avoid default and curtail loan servicer misconduct.

The multistate letter was sent today to Education Secretary Betsy DeVos in opposition to the Department's recent rollback of guidance intended to protect student loan borrowers and reform the student loan servicing industry.

"A crisis the likes of the housing crisis is looming in the student loan industry. Just like the mortgage service providers, student loan servicers are guilty of misconduct and abuse that has led millions of young people straddled with enormous debt. Our economy cannot afford a meltdown of the student loan industry, and our young people deserve a fair opportunity to repay their debt without the service providers deploying dishonest business practices that lead to further debt," said Attorney General Peter Kilmartin.

The guidance, issued by the Department of Education last year, centered on helping borrowers get accurate information about their loans and repayment options, ensuring the consistency of service provided by student loan servicers, increasing servicer accountability, and enhancing transparency. Critically, these reforms aimed to improve 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.

As explained in today's letter, investigations and enforcement actions undertaken by state attorneys general and the Consumer Financial Protection Burau (CFPB) have repeatedly uncovered student loan servicing misconduct. Earlier this year, a number of states and the CFPB sued Navient, one of the largest servicers of federal and private student loans, for widespread abuses in originating, servicing, and collecting upon defaulted student loans.

According to the letter, borrowers struggle under the weight of their student loan debt and federal student loan default rates are on the rise. In 2015, the 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.

Related links

  • Department or agency: Department of the Attorney General
  • Online: http://www.riag.ri.gov/
  • Release date: 04-24-2017

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