Washington – Three new, notable law review articles on student loans deserve the attention of the entire higher education community, especially those concerned about lapses in administering student loans at the U.S. Department of Education. Each of the articles also intersects with topics explored in this blog in recent years.
Second is David S. Rubenstein's "State Regulation of Federal Contractors: Three Puzzles of Procurement Preemption." From the abstract:
This article unpacks three doctrinal puzzles at the intersection of federalism and federal
contracting, using student loan law as its anchoring case study. Currently, more than $1
trillion of federal student loan debt is serviced by private financial institutions under contract
with the Department of Education. These loan servicers have allegedly engaged in systemic
consumer abuses but are seldom held accountable by the federal government. To bridge the
accountability gap, several states have recently passed “Student Borrower Bills of Rights.”
These state laws include provisions to regulate the student loan servicing industry, including
the Department’s federal contractors. States undoubtedly have legitimate interests to protect
their residents, communities, and local economies against industry malfeasance. The
overarching question, however, is whether federal law prohibits states from performing this
remedial function.
Although this article is a thorough discussion of many aspects of "preemption," it would have been even more instructive had the author explained why the Department of Education under Secretary Betsy DeVos suddenly inflicted the dubious doctrine on the student loan world in 2018. It was in considerable part due to favored contractors' loss of sovereign immunity, much discussed in this blog in previous posts. One of the first actions of the Biden Administration should be to withdraw the DeVos preemption edict, not only on grounds that it hurts borrowers, but that several courts across the country have found it wanting.
Third is "The Sovereign Shield," by Kate Sablosky Elengold
and Jonathan Glater. The authors explore how agencies like the Department of Education are subject to capture by interest groups. They even name names, as in this passage:
The case of student loan servicers illustrates potential capture concerns
all along the spectrum. We turn again to PHEAA as an illustration of the
revolving door between industry and government. Sally Stroup, for
example, spent twelve years on the staff of PHEAA before staffing the
House Education and Workforce Committee, had a brief stopover as a
lobbyist for Apollo Education Group, which represents for-profit colleges
and universities, and then was named as the Assistant Secretary of
Postsecondary Education in President George W. Bush’s Department of
Education. Ms. Stroup is far from the only example. One of President
Donald Trump’s most trusted campaign advisors now owns the lobbying
firm representing PHEAA, Kathleen Smith, a former DeVos top aide, has
been hired by PHEAA as senior vice president and director of federal
relations, and a former PHEAA executive, Robert Cameron, was named
the CFPB’s private student loan ombudsman, a job that has been called “the
nation’s top [student loan] watchdog.”
The question the authors don't address, but should, is whether this is not just capture, but racketeering and corruption. Such has been suggested before in the "Iron Triangle" series of this blog, naming the same names and several more. A fuller treatment is offered in Dan E. Moldea's 2020 book, Money, Politics, and Corruption in U.S. Higher Education.
All three of the above law journal articles are required reading for those who want to understand current student loan dilemmas and choices confronting the nation. In times past, the higher education trade press covered these matters; now it is increasingly only law journals. But at least, as illustrated by these outstanding articles, someone is paying attention to the lows to which a major federal agency has fallen.
