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AG HERRING JOINS BIPARTISAN COALITION URGING CONGRESS TO PROTECT STATE OVERSIGHT OF STUDENT LOAN SERVICING INDUSTRY
~ Pending legislation would dismantle state oversight of student loan industry despite state AGs' critical role in protecting students from fraud and abuse ~
RICHMOND (March 15, 2018)-Attorney General Mark R. Herring today joined a bipartisan coalition of 30 Attorneys General in a letter urging Congress to reject legislation that would block states from preventing and combatting fraud and abuse by the student loan industry. The letter urges Congress to remove language from the Higher Education Act reauthorization bill that would bar state oversight of private companies that originate, service, or collect on student loans, describing the provision as "an all-out assault on states' rights and basic principles of federalism."
"The Trump administration is doing all it can to make it easier for lenders and servicers to get away with fraud and abuse that costs students and taxpayers money. That's why it's so important that Congress preserve the authority my colleagues and I have to protect student borrowers," said Attorney General Herring. "The cases we've brought in recent years show that state-level oversight is necessary and important for the more than one million student borrowers in Virginia."
In Virginia, more than one million student borrowers have approximately $35 billion in outstanding student loan debt. Nationwide, borrowers owe an estimated $1.38 trillion in federal and private student loans-more than for auto loans, credit cards, or any other non-mortgage loan category.
In recent years, state Attorneys General have investigated significant, far-reaching abuses in the student loan industry and won settlements returning tens of millions of dollars to student borrowers. However, this critical state-level protection would be wiped away, and the student loan industry would be immunized from state AG action, should the pending legislation be enacted.
Today's letter to Congressional leaders follows a similar bipartisan effort in October, in which Attorney General Herring and state officials from across the United States called on the U.S. Department of Education to reject improper industry requests efforts to receive immunity from state-level oversight.
Major state-led investigations of student loan abuses have recently included:
- Education Management Corporation: The investigation uncovered that the school misled students about program costs, graduation rates, and job placement rates. As part of the multi-state settlement, State Attorneys General obtained over $100 million in loan forgiveness, including $2.29 million for Virginia students.
- Devry University: The investigation revealed that DeVry lured students with ads that exaggerated graduates' success in finding employment at graduation and contained inadequately substantiated claims about graduates' salary success. The Federal Trade Commission and other state regulators obtained over $100 million in refunds and debt relief for former DeVry students.
- Corinthian Colleges: State attorneys general were critical in uncovering widespread misconduct at the now defunct Corinthian Colleges and working to obtain relief for repayment of their student loans for tens of thousands of defrauded students nationwide.
- Aequitas Capital Management: An investigation found that Corinthian Colleges misrepresented graduates' employment success in connection with some of its programs, making certain students eligible for discharge of their federal student loans managed by Aequitas Capital Management, Inc. The resulting multi-state settlement provided $183 million in student loan relief for 41,000 students nationwide.
- Navient Corporation: Attorneys General have brought actions against Navient, the largest servicer of federal student loans, and certain of its subsidiaries for engaging in deceptive student loan servicing practices. Other states continue to investigate Navient.
The bipartisan letter was signed by the Attorneys General of New York, Colorado, California, Colorado, Connecticut, Delaware, Hawaii, Illinois, Iowa, Kansas, Kentucky, Maine, Maryland, Massachusetts, Minnesota, Mississippi, Montana, Nebraska, New Mexico, New Jersey, New York, North Carolina, Oklahoma, Oregon, Pennsylvania, Rhode Island, Tennessee, Utah, Vermont, Virginia, Washington, and the District of Columbia, as well as the Executive Director of the Hawaii Office of Consumer Protection.
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