January, 2020
Washington – Critical new student loan issues have emerged since the new year began. They must be thoroughly investigated by Congress prior to hearings that bring Secretary of Education Betsy DeVos to Capitol Hill to testify. House Education and Labor Committee chairman Bobby Scott wants DeVos to testify in March or early April.
• With the revelation that student loan servicers have been illegally collecting payments from approximately 29,000 borrowers, in addition to the 16,000 borrowers previously acknowledged, federal magistrate Judge Sallie Kim may increase the $100,000 contempt penalty she already has imposed on DeVos. After the October contempt order, DeVos dismissed the penalty as not appropriate and told the House Committee that she would not be paying it personally. That has raised objections from taxpayers as to why they should be paying for her contempt of court.
• The amount of the illegal collections identified so far is approximately $20 million. This is money being taken from borrrowers with sometimes devastating consequences for their personal lives. At the same time, Secretary DeVos may be forgiving loan servicer Navient (formerly Sallie Mae) of $22.3 million in false claims it has made against taxpayers. An administrative law judge ruled last March that Navient must pay the money back, but acknowledged that the final decision would be left to the Secretary. No one seems to know what has happened subsequently. Given the Secretary's history of not holding servicers accountable, it is possible if not likely that she has reduced or eliminated Navient's obligation to repay millions in fraudulently obtained taxpayer funds.
• A presidential candidate, Senator Elizabeth Warren, has proposed executive action to cancel hundreds of billions of dollars of student loan debt under an existing provision of the Higher Education Act. Warren's reading of the provision is supported by a legal analysis offered by the Project on Predatory Student Lending at Harvard Law School, an entity that has litigated successfully time and again against Secretary DeVos.
• About the proposal, an NPR report asked,
"Perhaps the most interesting question surrounding this provision that's been hidden in plain sight is this: Why are we only now hearing about it?"
Answer: the provision, 20 USC 1082, has not been hidden at all. I have discussed it often in these blog pages, most recently in September as part of a solution to the mismanaged Public Service Loan Forgiveness program. The question now must be how best to use the existing HEA authority to solve immediate crises in student loans. I have suggested using it to modify the terms of PSLF cancellation, but the provision could also be applied to servicers' forbearance abuse* and borrower defense issues.
These four points deserve immediate Congressional attention: there is not a moment to lose. Congress to date has not acquitted itself well on student loan issues. There is much evidence that the revolving door between the Department of Education and the student loan industry has resulted in corruption and racketeering at the expense of borrowers and taxpayers. So far, Congressional committees have not been up to acknowledging or investigating it.**
May 2020 be the year that Congress starts to give these matters the attention they deserve.
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* The CFPB in 2017 identified $4 billion in forbearance abuse at Navient. At PHEAA, a whistleblower has described how the process works there: "As long as the forms are filled out on time the interest stays accruing. If you fail to submit a form on time or we make a mistake that you can't prove or don't raise concern about then interest caps just like a forbearance. So for people who aren't behind the scenes or who don't know the right keywords to say might be paying thousands more over time depending on how much money you borrowed. I would reasonably guess a low figure that millions more are tacked on to the portfolios serviced by these lenders per year....These types of practices only further serve to hinder the low income families and keep them from getting ahead by not allowing them to be properly informed on all options and relevant consequences."
** In my unfavorable review of the PSLF hearing last September, I wrote the following: "The testimony of the Department of Education's person, a civil servant without authority to comment on policy, was successful if the purpose of his appearance was to save a political appointee from having to testify under oath." The civil servant was Jeff Appel, a friend and colleague of many years. I did not want to use his name, fearing it would draw attention to him for a role he clearly did not want. No matter; he was troubled by the appearance, collapsed days later, and passed away in November. DeVos Department political officials had thought it was clever to require his testimony rather than appear themselves. The Committee must not let such witness manipulation occur again.
