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NSLDN and American Oversight Sue Education Department for Student Loan Servicer Emails

Washington, DC (June 21, 2018) – Two watchdog groups today filed a lawsuit to expose the role that the student lending industry may have played in shaping new efforts by the Department of Education (ED) to limit legal protections for Americans with student loans. The National Student Legal Defense Network (NSLDN), represented by American Oversight, sued ED to obtain communications regarding the administration’s attempt to block states from using consumer protection laws to crack down on abuses by student loan servicers.

The lawsuit seeks the release of emails between senior Trump administration officials and companies that service federal student loans. In March 2018, ED issued a notice of interpretation arguing that states do not have the legal authority to regulate servicers or apply their consumer protection laws against servicers to protect student loan borrowers.

“At every turn, Secretary DeVos has acted in the best interests of corporate America and against the interests of students,” said Aaron Ament, President of NSLDN. “Her supposed oversight of for-profit colleges has been led by executives of those schools and the public has a right to learn whether student loan servicers are similarly directing her attempts to loosen the rules to their benefit.”

In its March 2018 preemption notice, ED described state regulatory actions as undermining the “uniform administration of the [federal loan servicing] program.” The interpretation prompted outcry from consumer advocates and state attorneys general across the country.

ED’s notice cemented the Trump administration’s position against oversight by state regulatory and law enforcement agencies. The administration made clear its opposition to state regulation in early 2018 when the Department of Justice filed a brief in Massachusetts state court in support of a student loan servicer. The issue of preemption has also been raised in similar cases in Illinois, Pennsylvania, and Washington, as well as in suits against Connecticut and Washington D.C.’s regulatory regimes.

“This is such a textbook example of regulatory capture that it's hard to imagine the Department of Education is acting without heavy input from the loan servicing companies themselves,” said Austin Evers, Executive Director of American Oversight. “If Betsy DeVos is going to sell out students then the public deserves to see who the highest bidders were.”

NSLDN’s lawsuit comes after ED failed to provide records in response to two Freedom of Information Act (FOIA) requests. The first FOIA request sought communications between ED officials and student loan servicers, including correspondence containing the words “preempt” or “preemption,” or mention of the March 2018 notice. The second FOIA request targeted communications between ED and representatives of the Student Loan Servicing Alliance, a trade group that represents the interests of the loan servicing industry. That FOIA request also focused on communications that mentioned “preempt,” “preemption,” or the notice.

The complaint is available here.

Tags   Litigation