When Education Secretary Betsy DeVos was confirmed, the major fear was that she would radically overhaul the public-education system and institute a broad school-voucher program. It turns out that requires congressional action that hasn’t been forthcoming, at least yet. But DeVos has been able to use administrative powers to reward wealthy friends and facilitate fraud against students.
DeVos’s latest move has been to end a partnership with the Consumer Financial Protection Bureau. The Education Department had been sharing information with the CFPB on companies that collect payments on federal student loans (also known “servicers”), under a memorandum of understanding between the two agencies. Those reports will stop at the end of September, according to a letter from two DeVos underlings. In the letter, the Education Department complained that the CFPB’s “intervention” in the student-loan market “expand[s] its jurisdiction into areas that Congress never envisioned…. to include the Department’s federally contracted loan servicers.”
Let’s first stipulate that private student-loan servicers shouldn’t exist. The government issues these loans directly, then contracts with an outside business to take the payments. The government runs the largest collector of payments in the world, also known as the IRS. Do we really think the government doesn’t know how to process a check?
That’s compounded by the fact that these private servicers are bad at their job. They have faced hundreds of millions of dollars in fines for pushing borrowers into costlier repayment plans, hiding information about cheaper options, overcharging active-duty military, and harassing borrowers after co-signers die, to name just a few examples. So the CFPB correctly sought to supervise these entities, as they have the authority to do. Student loan servicing is a consumer financial transaction, and the CFPB has jurisdiction over debt collection and credit reporting, along with Dodd-Frank’s prohibition on unfair, deceptive, or abusive acts and practices. Dodd-Frank even charges the CFPB to supervise companies “servicing loans” and “collecting debt related to any financial product or service.”