FOR IMMEDIATE RELEASE:
March 1, 2018

CONTACT:
Mario Moretto, Communications Director
mario@mecep.org
(207) 620-1101

DeVos threatens Maine’s authority to protect students from predatory loan practices

Maine must not be deterred from enacting Student Loan Bill of Rights

AUGUSTA, Maine – At a time when Maine lawmakers are considering legislation to limit predatory activity by student loan servicers, U.S. Education Secretary Betsy DeVos has moved to try to undermine states’ authority to protect students.

States, including Maine, have begun stepping up to address the significant abuses by student loan servicers in recent years. But in late February, the U.S. Education Department moved to protect companies such as Navient, the nation’s largest student loan servicer, by asserting the federal government has sole authority to oversee these companies.

Abuses in student loan servicing are rampant. The Consumer Financial Protection Bureau, or CFPB, has received more than 50,000 complaints about poor student loan servicing, and servicing errors. Last year, the CFPB sued Navient for cheating and deceiving borrowers. In one abusive practice, Navient failed to place qualified borrowers into affordable, income-based repayment plans, adding $4 billion in interest charges on top of their principal balances.

Maine consumers are struggling against these loan servicing companies. Maine ranks sixth in the nation in volume of student loan complaints to the CFPB, with a whopping 571 percent increase in the first three months of 2017 compared to the same period in 2016. Complaints from Maine consumers to the federal bureau averaged nearly 16 per month in 2017. The average Maine student debt is more than $31,000, according to the Institute for College Access and Success.

The Maine Legislature is currently considering LD 1507, “An Act to Establish a Student Loan Bill of Rights to License and Regulate Student Loan Servicers,” sponsored by Sen. Eloise Vitelli. MECEP testified in support of the bill during a public hearing in 2017. The bill would establish state-level oversight of student loan servicers, requiring companies like Navient to register with the state. It would also establish a Student Loan Bill of Rights, protecting students and graduates from common predatory practices while establishing an enforcement regime to hold servicers accountable.

“Student loan servicers such as Navient have shown they cannot be trusted in a vacuum,” said Garrett Martin, MECEP’s Executive Director. “The status quo harms student borrowers, including low-income students, veterans, and older borrowers, over their lifetimes. It’s bad enough that so many Maine students have to incur significant debt just to make it through college. It makes no sense to allow them to be subjected to abusive servicing and debt collection practices that make this situation worse when we have the ability to do something about it. This not only hurts borrowers by making it harder for them to gain an economic foothold and reap the benefits of their hard-earned education, but it also hurts our economy by suppressing economic activity and siphoning money out of Maine’s economy.”

States can license student servicers to help prohibit misrepresentations, payment misapplications, and false credit reports that force students into default or paying more than they owe. Laws of this nature are already in place in Connecticut, Illinois, California and D.C., and reforms are currently winding through the legislative process in Maine, as noted above, and in several other states.

Attorneys General can bring cases to enforce state Unfair and Deceptive Practices laws as they did against Navient in Pennsylvania, Illinois, and Washington. A bi-partisan group of Attorneys General in 26 states, Maine Attorney General Janet Mills, wrote Secretary DeVos last fall asserting the right of states to enforce their own laws, on the basis that Congress has not given the Department of Education the authority to pre-empt state regulations regarding student loans.

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Related resources:

• Federal Student Loan Portfolio by Borrowers’ States
• Group State Attorneys General Letter to Secretary DeVos (October 23, 2017)  
• CFPB 50 State Snapshot of Student Debt (October 2017)