Raúl Torrez | Attorney General

AG Balderas Urges Congress to Reject Legislation Blocking State Oversight of Student Loan Industry

FOR IMMEDIATE RELEASE: March 15, 2018

Contact: James Hallinan (505) 660-2216

Santa Fe, NM – Attorney General Hector Balderas today joined a bipartisan coalition of 30 attorneys general in a letter urging Congress to reject legislation that would block states from preventing and combatting fraud and abuse by the student loan industry.

“Thousands of New Mexican students have been victimized by the predatory student loan and for-profit education industries and this legislation would only put our students in more danger,” Attorney General Balderas said. “I am urging Congress to partner with us in our mission to help New Mexico students improve their lives, and not get trapped in unnecessary debt.”

Americans are facing a student debt crisis. As of the fourth quarter of 2017, U.S. borrowers owed an estimated $1.38 trillion in federal and private student loans—more than for auto loans, credit cards, or any other non-mortgage loan category.

In recent years, state attorneys general have investigated significant, far-reaching abuses in the student loan industry and won settlements returning tens of millions of dollars to student borrowers.

However, the pending version of the Higher Education Act reauthorization (H.R. 4508, also known as the PROSPER Act), includes language to preempt state level oversight of private companies that originate, service, or collect on student loans. As drafted, the language attempts to immunize the student loan industry from the state-level enforcement and reforms underway across the country.

Describing the language as “an all-out assault on states’ rights and basic principles of federalism,” the letter urges Congress to strip the language from the House Bill and to omit it from consideration in the Senate.

This follows a similar bipartisan effort in October, in which state officials from across the United States called on the U.S. Department of Education to reject improper industry requests efforts to achieve similar results.

Major state-led investigations of student loan abuses have recently included:

  • Education Management Corporation: The investigation uncovered that the school misled students about program costs, graduation rates, and job placement rates. As part of the multi-state settlement, State Attorneys General obtained over $100 million in loan forgiveness,
  • Devry University: The investigation revealed that DeVry lured students with ads that exaggerated graduates’ success in finding employment at graduation and contained inadequately substantiated claims about graduates’ salary success.
  • Corinthian Colleges: State attorneys general were critical in uncovering widespread misconduct at the now defunct Corinthian Colleges and working to obtain relief for repayment of their student loans for tens of thousands of defrauded students nationwide.
  • Aequitas Capital Management: An investigation found that Corinthian Colleges misrepresented graduates’ employment success in connection with some of its programs, making certain students eligible for discharge of their federal student loans managed by Aequitas Capital Management, Inc. The resulting multi-state settlement provided $183 million in student loan relief for 41,000 students nationwide.
  • Navient Corporation: Attorneys General have brought actions against Navient, the largest servicer of federal student loans, and certain of its subsidiaries for engaging in deceptive student loan servicing practices. Other states continue to investigate Navient.

Click here for a copy of the letter – https://ag.ny.gov/sites/default/files/ag_letter_student_loan_preemption.pdf

Raul Torrez

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