Disagreements Arise within the Trump Administration over Student Loans

Oct 18, 2019Federal Regulation, News

Over the past year, there has been a quiet battle brewing between the Department of Education and the Consumer Financial Protection Bureau (CFPB) over the student loan industry. 

Kathy Kraninger, Director of the CFPB, sent a letter to Senator Elizabeth Warren stating that the CFPB had been conducting examinations of student loan servicers. However, those entities stopped providing the CFPB requested information for supervisory examinations since December 27. 

On that day, the Department of Education issued a Memorandum stating, “All federal loan servicers, private collection agencies, and other Department contractors who support the federal student aid programs must comply with the requirements of the Privacy Act when they access or use Privacy Act-protected records of the Department.” The Memorandum added, “Any request from any third party for Department records to which a contractor has access must be made directly to the Department, where it will be evaluated for compliance with the requirements of the Privacy Act, unless the contract has specifically provided otherwise.”

In other words, the Department of Education ordered student loan servicers to refuse providing requested information from any third-party, including federal agencies (i.e. the CFPB) and state attorney’s general. Only officials at the Education Department were allowed to handle such data requests. In addition, the Education Department terminated a Memorandum of Understanding (MOU) with the CFPB on October 1, 2017, which has not helped the situation between the two federal agencies. 

Kraninger claims that these actions by the Department of Education created significant obstacles in investigating and, thus bringing enforcement actions, against student loan servicers. 

About a year ago, the CFPB was investigating Navient, a student loan processor, which refused to hand over information to the CFPB. The Bureau, under Mick Mulvaney, sued Navient. The federal judge overseeing the case sided with the CFPB, arguing that Navient, “cannot assert that the records may ultimately belong to the Department of Education or use the Privacy Act to shield the requested borrower documents” from the CFPB’s requests.

Members of Congress are now asking Kraninger why she has not filed lawsuits against student loan servicers to obtain the requested information, similar to how the CFPB under Mulvaney obtained information from Navient. 

“So if you’re waiting for the Department of Education to give you permission to oversee the Public Service Loan Forgiveness Program, you’re going to be disappointed,” said Senator Bob Menendez. “So who’s going to get hurt here are public servants who deserve to have the opportunity to have loan forgiveness as part of their service. And I really urge you to do what your predecessor did and use the enforcement capabilities that you have.”

Kraninger assured concerned members of Congress that she was looking into the issue and was working diligently to develop a new MOU with the Department of Education.

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