States are increasingly stepping in to protect student borrowers from predatory loan collection companies, and the Trump administration is riding in to the rescue—of the loan companies, not the students.
Education Secretary Betsy DeVos is preparing to issue a declaration that companies collecting federal student loans are off limits for state lawmakers and regulators. The “notice of interpretation” argues that only the federal government, not the states, has the authority to oversee federal student loan servicers, according to a draft of the document obtained by POLITICO. That includes industry giants like Navient and Nelnet. [...]
But consumer advocates and nearly half of the nation’s attorneys general disagree, arguing that states have the right to oversee companies operating within their borders that collect loan payments from their residents.
The industry’s lobbying efforts last year drew criticism from a group of 25 state attorneys general, led by New York’s Eric Schneiderman. In a letter, the attorneys general urged DeVos “to reject an ongoing campaign by student loan servicers and debt collectors to secure immunity for themselves from state-level oversight and enforcement.”
The Education Department “cannot sweep away state laws that apply to student loan servicers and debt collectors,” said the letter, which was also signed by a handful of GOP attorneys general, including Ken Paxton of Texas, Herbert Slatery of Tennessee and Cynthia Coffman of Colorado.
In other words, if it’s states and the little people on one side and giant loan companies on the other, the Trump Education Department, representing the supposedly populist president from the supposed party of states’ rights, is definitely supporting the giant loan companies. But it’s going to be a fight, and a fight that at least a few state-level Republicans are willing to join.