A February 2019 report from the department's inspector general already questioned the role of federal oversight as student loan debt has reached US$1.5 trillion in the US.
Democratic attorneys general from 20 states and Washington, DC, sent a letter to US Secretary of Education Betsy DeVos denouncing her Department of Education is blocking access to records requested by law enforcement to oversight student loan servicing companies.
"The department's policy reversal impedes states' ability to enforce the law and shields unprincipled industry actors from regulatory enforcement, harming student loan borrowers nationwide," the Attorney Generals state in the letter.
A February 2019 report from the department's inspector general already questioned the role of federal oversight as student loan debt has reached US$1.5 trillion in the U.S.
Consumer advocates doubt the federal government is protecting borrowers from confusing and dubious mechanisms and only servicing private interests.
The report stated that the Federal Student Aid management “rarely used available contract accountability provisions to hold servicers accountable for instances of noncompliance.” That is why state officials are asking for dual oversight in the “higher education arena by state and federal authorities,” as it “historically has been the cornerstone of responsible regulation and policy-making.”
Yet a spokeswoman for the department, Elizabeth Hill told CNN in an emailed statement, that "federal loans are federal assets and therefore must be controlled and regulated by the federal government."
The abandonment of its policy of disclosing records to law enforcement agencies represent a “step away from the interests of consumers and toward the interests of corporate actors, who seek to use the Privacy Act as a shield as they resist being held accountable for their actions,” the letter concludes.
Back in 2017, under DeVos administration, the Department of Education ended an agreement with the Consumer Financial Protection Bureau to share information from loan companies. Yet this is not the first time the secretary has been scrutinized for her stance on student loans.
At the beginning of 2018, the Department awarded a contract to a company with financial ties to DeVos, to help the agency collect overdue student loans. Performant Financial Corp. was one of two companies selected. Four months later, in May, Attorneys for the department notified the U.S. Court of Federal Claims the agency's plan to retract the contracts awarded without providing details.
Meanwhile, Pioneer Credit Recovery, a collector of student loans for the U.S. Department of Education, will have to face a lawsuit accusing it of charging collection fees from borrowers before they were due, a federal judge in New Jersey ruled Thursday.