Student debt is economically crippling a generation of Americans seeking higher education.
So what is Education Secretary Betsy DeVos doing about it? About what we would expect any other member of President Donald Trump’s cabinet to do: run right into the arms of exploitative loan providers and eschew policies the prior administration enacted to prevent predatory lending.
The Obama administration put in place policies requiring the US Education Department to investigate loan servicing companies’ past conduct before the government awarded lucrative contracts. Those contracts were required to include certain consumer protections, such as prohibiting loan servicing companies from cheating federal student loan borrowers, and guiding borrowers through the repayment process.
The country’s largest loan servicing provider, Navient, is facing several lawsuits for putting its own interest before borrowers’. According to the New York Times Editorial Board, a Consumer Financial Protection Bureau (CFPB) lawsuit claims Navient benefited from steering borrowers toward expensive repayment strategies that added billions of dollars in interest to Navient’s balance sheets. Twenty-nine states have filed lawsuits pertaining to Sallie Mae, the company that formed from Navient in 2014.
Illinois and Washington attorneys general argue Sallie Mae engaged in predatory lending that saddled people with private subprime loans the company was aware were likely to fail because borrowers would be unable to repay them. The attorneys feel borrowers deserve to have these loans forgiven.
If this scenario is causing deja-vu, it should. It bears an alarming resemblance to the subprime mortgage crisis of 2008, when various mortgage lenders steered borrowers into risky, high-cost mortgages they could never hope to repay, causing millions to lose their homes.
The Illinois and Washington lawsuits claim Sallie Mae used subprime private loans to foment relationships with exploitative schools that then helped Sallie Mae sell more federal loans. Since the federal government guarantees those loans, the government is required to reimburse lenders when borrowers default.
Navient has, of course, denied foul play. But students’ lives are being destroyed all over America because of exploitative activity that clearly benefits predatory lenders and schools dealing with them.
Betsy DeVos is taking a conspicuous backseat, implying this behavior is going to be acceptable under the Trump administration.
So much for “making American great again.”
Featured image from Gage Skidmore via Flickr available under CC BY-SA 2.0.
