Betsy DeVos looks at a classroom of lawyers (illustrated)

Last month, 18 states and Washington, D.C. sued the Education Department for halting new rules meant to protect student loan borrowers.

The rules, collectively called “borrower defense to repayment,” are meant to help students ripped off by for-profit schools that make false promises about job placement, degree offerings or otherwise deceive students into borrowing money.

Basically, if you prove you were ripped off, your student loan debt gets erased. Challenging them is one of many ways DeVos is contributing to the student loan problem instead of helping…

Doing nothing isn’t “helping harmed students”

The borrower defense rules were developed after the for-profit Corinthian Colleges defrauded students nationwide and then fell apart, leaving students with a bill and nothing to show for it. The same thing happened with ITT Tech. Many of those loans were ultimately forgiven — at a cost to taxpayers.

“The rules that Ms. DeVos froze would have shifted some of that risk back to the industry by requiring schools at risk of closing to put up financial collateral,” The New York Times wrote. They were supposed to take effect at the start of July.

But after Betsy DeVos was confirmed as education secretary, she predictably said the rules were “muddled” and unfair to all sides, and she needed time to review and revise them — even though the Obama administration had already spent two years developing them with stakeholders.

Advertisement

Democratic attorneys general pounced and said DeVos was defending for-profit colleges. That seems like a fair assessment, since the only people getting hurt by inaction are taxpayers and wronged borrowers.

But “the secretary decided it was time to take a step back and hit pause on these regulations until this case has been decided in court and to make sure these rules achieve their purpose: helping harmed students,” a department spokeswoman said.

Stop hiding the battle on Public Service Loan Forgiveness

I also criticized the Education Department a couple months ago for two other things that would hurt borrowers: One is waging a legal battle over student loan forgiveness for teachers, firefighters, police officers, and other longtime public servants. There’s been some movement on that fight, and it’s not good.

While the first group of borrowers who applied for the program nearly 10 years ago should be in line for forgiveness in October, the Education Department tried the same excuse they just did with borrower defense. They effectively said: Whoa there, we need time to look at this, this might be a bad idea, we didn’t promise you anything. A group of lawyers who felt otherwise sued.

And this week, the Education Department asked for that case to be decided by “summary judgment,” NPR writes. That means: without a trial. It argues the department hasn’t made any final judgment on the half a million people who are, on paper, completely eligible for forgiveness. (Many have also been directly told, for years, that they were.)

That case needs to go to trial, and it needs to be highly publicized, for at least one very simple reason. Even if DeVos ultimately wins it, it’s important for borrowers not to sacrifice their careers or take lower-paying jobs hoping to get student loan forgiveness only to ultimately have the rug yanked out from underneath them.

I don’t think anyone would argue that teachers, firefighters, and police officers should know what they’re getting into and not get shorted for their work.

The good news: No super loan servicer

To end on a positive note, though, there’s also fresh evidence the department can learn from its mistakes. The other thing I criticized DeVos for was her plan to consolidate student loan servicing under one company in the name of efficiency.

As I wrote, no one company can handle the volume of student loans already out there. The biggest among them, Navient, handles roughly a quarter of student loan debt. It’s one of a handful that submitted a proposal for the contract, even though it certainly didn’t deserve to win it.

The Education Department had previously dropped a Navient subsidiary because of consumer complaints about how it handled student loans, and the Consumer Financial Protection Bureau is currently suing Navient for “systematically and illegally [failing] borrowers at every stage of repayment” and ripping consumers off $4 billion.

Obviously, no one company can handle all that debt, and biggest doesn’t mean best anyway. So the good news is that DeVos has abandoned her one-servicer-to-rule-them-all plan.

“The Trump administration announced that it was scrapping plans to award a massive contract to a single company to manage the monthly payments of all student loan borrowers, and said it would come up with a new proposal aimed at improving customer service for student loan payments,” Politico wrote Tuesday.

Why back off? Even some Republicans criticized the plan, and a bipartisan group of senators wrote legislation that would block it. Those legislators — Sens. Roy Blunt (R-Mo.), Elizabeth Warren (D-Mass.), James Lankford (R-Okla.) and Jeanne Shaheen (D-N.H.) — are my new heroes. (Of course, Warren already was, not least because she dreamed up the CFPB and launched DeVos Watch.)

Here’s the DeVos spin on that decision: Instead of one servicer, the department will instead create a unified backend customer service platform for all servicers to use.

That’s a much better idea: For one, it gives the department easier oversight over how student loans are handled and more control over the process. It also creates a consistent experience and consistent expectations for borrowers, even if their loans get sold to another servicer or they take out additional loans.

The big question is how well-designed that system will be, and whether DeVos can be trusted to oversee it. But it’s at least a sign she listens to criticism on some level — which makes her smarter than the guy who picked her.

Advertisement
Advertisement

Article last modified on August 8, 2017. Published by Debt.com, LLC . Mobile users may also access the AMP Version: 18 States Say Betsy DeVos Is a Failure - AMP.

Related Posts

Article last modified on August 8, 2017. Published by Debt.com, LLC .

Advertisement
Advertisement