As the Times reported, DeVos' Department of Education has issued a new policy statement that says federal law can preempt state consumer-protection laws aimed at curbing abuses in the loan-servicing and debt-collection business. DeVos' Department argues that state consumer-protection laws can undermine uniform administration of the student loan program.
The Times also criticized the Republican-sponsored bill to reauthorize the Higher Education Act. This bill, if it becomes law, will preempt the right of the states to regulate the student-loan business--including student-loan debt collectors and loan servicers.
Betsy DeVos' craven and servile pandering to the student-loan industry is a scandal; and DeVos--not the Russians--should be the focus of Democratic attacks on the Trump administration. DeVos' behavior belies all the blather coming out of the White House about how Trump policies benefit the middle class. DeVos apparently hopes to remove all restraints on the venal and corrupt student-loan business, which is doing a pretty good job of dismantling the middle class.
In fact, the federal student-loan program is a disaster, with millions of casualties as student borrowers are pushed into default or into long-term repayment plans that never pay off borrowers' loan balances.
Here's what can be done to stop DeVos' mad-dog scheme to line the pockets of her debt-collector cronies:
1) The state attorney generals should sue Betsy DeVos and DOE every time they attempt to dismantle the states' proper role of protecting consumers from fraud. As the Times noted, this is what the state AGs are doing.
2) Other states should follow the example of the Massachusetts Bar Association and the Massachusetts Attorney General and organize teams of volunteer lawyers to represent distressed student-loan debtors in the bankruptcy courts. If just a few more state AGs joined the Bay State--California, Florida, Illinois, and Texas, for example--I believe the bankruptcy courts would begin revising their harsh attitude toward college borrowers in the bankruptcy courts.
3) The Democrats should take every opportunity to question Trump administration officials under oath about the activities of the student-loan guarantee companies who act as DOE's debt collectors. Why do four of these agencies--nonprofit organizations--individually hold $1 billion in assets while they hound elderly debtors in the bankruptcy courts. Let's see a breakdown of the attorney fees these agencies are paying to hire asshole lawyers to crush student-loan debtors.
Everyone of good will should take heart at Fed Reserve Chair Jerome Powell's candid admission that he could not explain why the Bankruptcy Code treats student-loan debtors so harshly--basically putting them in the same category as criminals.
As someone once said, when a thing can't go on forever, it won't. The abuses of the federal student loan program can't go on forever. More than 40 million borrowers collectively owe $1.5 trillion in student loans (including private loans); and about half of these borrowers will never repay their debt.
The Federal Reserve Bank of New York and other agencies have documented that student-loan debt is hurting the economy--preventing people from buying homes and saving for retirement.
The time has come for American society to decide: Do we want to continue enriching a bunch of crooks in the for-profit college business and the debt-collecting racket or do we want a middle class?
We know Betsy DeVos' answer: she wants to enrich her corrupt buddies even if she helps destroy the middle class.
The Student Loan Industry Finds Friends in Washington. New York Times, March 18, 2018.
Robert Shireman and Tariq Habash. Have Student Loan Guaranty Agencies Lost Their Way? The Century Foundation, September 29, 2016.