U.S. Secretary of Education Betsy DeVos (Photo by Chip Somodevilla/Getty Images)
A new federal lawsuit alleges that Betsy DeVos failed student loan borrowers.
Here’s what you need to know - and how it may affect you.
New Lawsuit: The Allegations
Student Debt Crisis, a non-profit student loan advocate, alleges in a new lawsuit that the Trump administration failed to supervise large student loan servicers who collect student loan payments and advise borrowers how to better manage their student loans. As a result, the plaintiffs allege that more than 41 million student loan borrowers who collectively owe more than $1 trillion are “at greater risk of being cheated by these companies.”
The lawsuit names DeVos and Kathy Kraninger, the direct of the Consumer Financial Protection Bureau (CFPB), and their respective agencies. Student Debt Crisis alleges that the CFPB changed federal policy that requires it to supervise large student loan servicers, including those companies that manage the country’s Public Student Loan Forgiveness (PSLF) program. This student loan forgiveness program has come under scrutiny for confusing requirements and for rejecting 99% of applicants.
Among other claims, the lawsuit alleges that:
- “The CFPB wrongly asserted that [it] only has authority over [private student loans], which account for less than 20% of student loan debt.
- Kraninger hired a former executive at one of the largest student loan servicers as the CFPB’s new student loan ombudsman, despite his former employer being the subject of thousands of consumer complaints and lawsuits for harming student borrowers during the time he was responsible for its compliance with consumer protection laws.
- DeVos revoked a legally required Memorandum of Understanding with the CFPB that assists the agencies to coordinate and resolve student borrower complaints.”
In recent years, numerous lawsuits from advocates and attorneys general have been filed against student loan servicers, alleging misconduct such as incorrectly processing student loan payments, harming borrowers’ credit and not operating in borrowers’ best interests. As a result, some of these lawsuits have alleged that teachers, nurses, first responders, social workers and other public servants are paying millions of dollars more than they otherwise should in student loan payments.
“We are suing Education Secretary Betsy DeVos and CFPB Director Kathy Kraninger for ignoring student loan industry abuses at a time when stronger consumer protection laws are desperately needed,” Student Debt Crisis Executive Director Natalia Abrams said. “Time and time again, we speak with student loan borrowers who dedicate their lives to public service, yet they lose access to federal loan forgiveness due to bad behavior by their loan servicer.”
The Education Department and CFPB have not commented on the lawsuit.
Action Plan: 5 Steps
When it comes to your student loans and student loan servicer, the ball is in your court:
1. Know your student loan options
One role of your student loan servicer is to help you understand your available options with regard to your student loans, including:
- Student Loan Refinancing
- Student Loan Consolidation
- Income-Driven Repayment Plans
- Student Loan Forgiveness
For student loan repayment, it's best to conduct your own independent research, rather than rely on your student loan servicer to give you all the answers.
2. Monitor the latest student loan developments
There may be several changes to your student loans in 2020 and beyond. This may include changes to student loan repayment and student loan forgiveness, among others.
3. Keep records
Keep an organized record of all your student loan payments, including any correspondence with your student loan servicer. Always communicate in writing.
4. File a complaint
If you feel you have been wronged by your student loan lender or servicer, you can send a formal complaint to the U.S. Department of Education, CFPB, your lender or student loan servicer.
5. Pay Off Your Student Loans Faster
One of the best ways to avoid dealing with student loan servicers is not to have one. This student loan calculator shows you how much you can save when you pay off student loans faster.
