Attorney General Peter F. Kilmartin joined a bi-partisan effort by 25 states to protect students from predatory student loan servicers. In a letter to Secretary Betsy DeVos, the attorneys general urge the U.S. Department of Education to reject the campaign by student loan servicers and debt collectors to dismantle state oversight of the student loan industry. In recent years, state attorneys general have investigated a number of significant, far reaching problems in the student loan industry and won settlements returning tens of millions of dollars to student borrowers.
In response, leading industry groups have begun lobbying the Department to block or "preempt" state led efforts to combat potential and ongoing abuses by student loan servicers. As the attorneys general explain in today's letter, the Department lacks the legal authority to block state oversight and any attempt to sideline effective state oversight amid the mounting student loan crisis would only put students and borrowers at risk.
"Protecting students from predatory and fraudulent student loan service providers is not a conservative or liberal issue – it is simply a consumer protection matter," said Attorney General Peter F. Kilmartin. "State attorneys general are best equipped to protect consumers from predatory lenders, and we cannot allow the US Department of Education to succumb to pressure by for-profit education lobbyists to block our authority to hold these service providers accountable."
Major state-led investigations of student loan servicers have recently included: o 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, including $88,890 in loans for approximately 79 Rhode Island former students. o Devry University: The investigation revealed that DeVry lured students with ads that exaggerated graduates' success in finding employment at graduation and contained inadequately substantiated claims about graduates' salary success. The FTC and other state regulators obtained over $100 million in refunds and debt relief for former DeVry students. o Aequitas Capital Management: The investigation conducted by the DOE and the California Attorney General's Office found that Corinthians College misrepresented graduates' employment success in connection with some of its programs, making certain students eligible for discharge of their federal student loans managed by Aequitas Capital Management, Inc. The resulting multi-state settlement provided $183 million in student loan relief for 41,000 students nationwide.
The attorneys general explain in their letter that the industry requests would "defy the well-established role of states in protecting their residents from fraudulent and abusive practices, plainly exceed the scope of the Department's lawful administrative authority, and would needlessly harm the students and borrowers at the core of the Department's mission."
Additionally, the attorneys general point out that "state enforcement agencies have long been at the frontlines in protecting their citizens from fraud, deceptive conduct, and unfair business practices, including by financial service companies, debt collectors, and others."
The bipartisan letter sent today included signatures of the attorneys general and other top state officials from California, Colorado, Connecticut, Delaware, Hawaii, Illinois, Indiana, Iowa, Kansas, Kentucky, Massachusetts, Maryland, Maine, Minnesota, Montana, New York, North Carolina, Oregon, Rhode Island, Tennessee, Texas, Virginia, Vermont, Washington and the District of the Columbia.