AG Madigan protests Trump's student loan move
Illinois Attorney General Lisa Madigan is wading into a Washington controversy that hasn't received much notice yet but has explosive potential: who ought to service hundreds of billions of dollars in college student loans, and how.
In a letter today signed by Madigan and colleagues from 20 other states, the attorney general asks President Donald Trump's new education secretary, Betsy DeVos, to "reconsider immediately" her decision to hit the reset button on near-final new servicing rules that were being developed by the Obama administration.
DeVos' office cited "a lack of consistent objectives" in calling the Obama rules back for further development and perhaps scrapping. But in their letter, Madigan and the other AGs say it's students and their parent who will suffer.
"The effect of the department's action is to leave student loan borrowers mired in ambiguity and inconsistency that the servicing reforms were intended to prevent," they wrote. In particular, they said, "common-sense" rules now have been revoked that required that anything a student pays generally be applied to the loan with the highest interest rate, and that borrowers be informed of income-based repayment plans they might be eligible for that may allow them to stretch out their payments.
"Many such borrowers would benefit," the letter states, "but are prevented from doing so by student loan servicer misconduct and misinformation."
The state regulators are especially upset at a DeVos change eliminating a requirement that a servicer's past performance be a main factor when her department awards future contracts for loan servicing. The letter notes a suit by Madigan against one servicer, Navient, for alleged widespread abuses. Navient has denied any misconduct.
DeVos' office did not have any immediate response.