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A.G. Schneiderman-Led Bipartisan Coalition Of 25 AGs Calls On Secretary Devos To Reject Student Loan Servicing Industry's Demand For Immunity From State Law Oversight And Enforcement

News from Attorney General Eric T. Schneiderman 

FOR IMMEDIATE RELEASE
October 24, 2017

Attorney General’s Press Office / 212-416-8060
nyag.pressoffice@ag.ny.gov
Twitter: @AGSchneiderman

A.G. SCHNEIDERMAN-LED BIPARTISAN COALITION OF 25 AGS CALLS ON SECRETARY DEVOS TO REJECT STUDENT LOAN SERVICING INDUSTRY’S DEMAND FOR IMMUNITY FROM STATE LAW OVERSIGHT AND ENFORCEMENT 

In Letter To DeVos, Officials From 25 States Oppose Improper Industry Attempt To Sideline State Regulators Amid Student Loan Crisis 

Schneiderman: Protecting Student Loan Borrowers Is Something We Can All Agree On, Regardless of Party Or Ideology 

NEW YORK--Attorney General Eric T. Schneiderman today led a bipartisan coalition of Attorneys General and officials representing 25 states in a letter to Secretary Betsy DeVos urging the U.S. Department of Education to reject the campaign by student loan servicers and debt collectors to dismantle state oversight of the student loan industry. In recent years, state AGs have investigated a number of significant, far reaching problems in the student loan industry and won settlements returning tens of millions of dollars to student borrowers.

In response, leading industry groups have begun lobbying the Department to block or “preempt” state led efforts to combat potential and ongoing abuses by student loan servicers. As the AGs explain in today's letter, the Department lacks the legal authority to block state oversight and any attempt to sideline effective state oversight amid the mounting student loan crisis would only put students and borrowers at risk.

“State Attorneys General from across the country have put tens of millions of dollars back into the pockets of student borrowers,” said Attorney General Schneiderman. “Today, I’m proud to lead a coalition of Attorneys General from red and blue states to fight back against an industry that is still in urgent need of reform. We cannot allow student loan servicers to sidestep state law and oversight and deny students and borrowers these vital protections from student loan abuses.”

Major state-led investigations of student loan servicers 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 $2.3 million for New York 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 FTC, Attorney General Schneiderman, and other state regulators obtained over $100 million in refunds and debt relief for former DeVry students. Attorney General Schneiderman later won $2.25 million in restitution for New York Devry graduates.
  • Aequitas Capital Management: The investigation conducted by the DOE and the California Attorney General’s Office found that Corinthians College 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, including $2.4 million in loan relief for 350 New Yorkers.

Click here to read the letter sent today by the Attorneys General.

The Attorneys General explain in their letter that the industry requests would “defy the well-established role of states in protecting their residents from fraudulent and abusive practices, plainly exceed the scope of the Department’s lawful administrative authority, and would needlessly harm the students and borrowers at the core of the Department’s mission.”

Additionally, the Attorneys General point out that “state enforcement agencies have long been at the frontlines in protecting their citizens from fraud, deceptive conduct, and unfair business practices, including by financial service companies, debt collectors, and others.”

In addition to Attorney General Schneiderman, the bipartisan letter sent today included signatures of the Attorneys General and other top state officials from California, Colorado, Connecticut, Delaware, Hawaii, Illinois, Indiana, Iowa, Kansas, Kentucky, Massachusetts, Maryland, Maine, Minnesota, Montana, North Carolina, Oregon, Rhode Island, Tennessee, Texas, Virginia, Vermont, Washington, and the District of the Columbia.