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More than 130 Democratic lawmakers called on Education Secretary Betsy DeVos Wednesday to reinstate consumer protections for student borrowers in federal contracts with loan servicers.
DeVos earlier this month rescinded guidance issued last year by then Secretary John B. King Jr. directing the Office of Federal Student Aid to consider servicers' past performance in the awarding of contracts. In the same decision, she withdrew separate guidance issued by former Under Secretary Ted Mitchell laying out a comprehensive set of servicing standards based on guidelines developed in collaboration with the Consumer Financial Protection Bureau and the Department of Treasury. The guidance from Mitchell also spelled out the requirements for an ambitious web portal the department had planned to build for all borrowers to use regardless of their servicers.
The department has yet to release an alternative set of guidelines for the next round of contracts for loan servicers, and it's unclear if it will follow through with any of the recommendations from previous guidance, including the web portal.
Democrats, including Massachusetts Senator Elizabeth Warren and Washington Senator Patty Murray, the ranking Democrat on the Senate education committee, said DeVos's decision to rescind the previous guidance raised questions about how the department will hold servicers accountable and protect the rights of borrowers.
“Your decision to rescind these memos -- including the guidance making servicers’ past performance and record of compliance with the law the most important non-cost factor in the evaluation -- will put millions of borrowers and taxpayers at risk,” the Democratic lawmakers wrote. “Without accounting for past performance, federal contracts will be open to bidders that have previously violated state or federal consumer protection laws, mistreated members of our military and consistently ignored the needs of their borrowers.”
Before the letter from congressional Democrats, 20 state attorneys general weighed in to express their "profound concern" over the department's revocation of the guidance. That letter cited investigations and enforcement actions by state AGs' offices targeting servicers, including Navient, for widespread abuses.
"The guidance revoked by the department was expressly designed to protect borrowers and correct pervasive student loan servicing failures that harm student loan borrowers and their families," the letter said. "By revoking these critical protections, the department has abdicated its responsibility to student loan borrowers."
