Richard Cordray, the new head of the federal government’s student loan program, on Friday announced that the Education Department was reversing a policy that was put in place during the Trump Administration which blocked state and federal regulators from accessing records needed to investigate student loan lenders, servicers, and private collection agencies.
Previously, state attorneys general and other regulators needed to submit requests for information directly to the Education Department, which more often than not denied the requests. A copy of the new policy is available by clicking here.
“States and regulators need information when they think a loan servicing company might be violating a law or regulation,” Cordray wrote in a blog post announcing the new policy shift. “To know for sure, they need to look at the companies’ policies and procedures, their handbooks, complaints made by customers, and anything else that shows how the company operates.”
Back in 2017, the Education Department told student lenders and other companies to avoid responding directly to inquiries from third parties, including regulators at the state and federal level. Now, the Education Department is seeking to create a “streamlined and expedited process” when any authority requests information needed to investigate or regulate companies engaged in student loan lending or collections. “It’s time for us to be a partner, not a roadblock,” Cordray wrote.
Just last week, the attorney general of Colorado sued the Pennsylvania Higher Education Assistance Agency, or PHEAA, because it refused to “fully comply with state law requiring consumer protection oversight.” Student loan servicers are required to be licensed in Colorado and PHEAA refused to provide the state’s attorney general with records related to how the servicer has handled the Public Service Loan Forgiveness program during the COVID-19 pandemic.
Republicans accused Cordray and the Education Department of bowing “to the whims of state-based Democrat politicians who are more interested in putting companies out of business than helping struggling student loan borrowerts.”
