Washington — After yesterday's bombshell announcement by the Secretary of Education that the government would cancel $39 billion of student loans for over 800,000 borrowers, it's time to get answers as to what's going on here.
The Secretary said it is necessary to act to correct mistakes that were made in a broken lending and servicing system, which is one way of putting it. A more accurate way would be to call it what it is: finally, a quantification of years of massive waste, fraud, abuse, mismanagement, malfeasance, deception, and racketeering.
While I applaud the work of those dedicated employees at the U.S. Department of Education who have been working tirelessly to bring fairness to victimized borrowers (you know who you are), here are questions that must now be answered about the ongoing debacle that has been festering for many years:
- What did the government know and when did it know it?
- Was there inside help for the perpetrators from within the Department of Education and Department of Justice?
- Will there be clawbacks from any loan servicers or will taxpayers have to pay the entire cost of the cancellations?
- Will there be an investigation and prosecutions?
If there is an investigation, I stand ready to assist to the extent I can shed light on these and related questions. When the government knew can be pinpointed; who assisted inside the government can be identified. Evidence is abundant. Some is already public; some would have to be released by the government itself.
This morning I received an email from a student loan borrower in Oregon who had been victimized badly over the years, into whose case I looked in much detail. She was notified yesterday that most or all of her remaining loan balance would be cancelled. I had taken up her case directly with the Department, which kindly allowed me to describe exactly how lenders and servicers worked their frauds and deceptions on her. She wrote: "This is GREAT news and a huge relief."
This is being repeated in 800,000 households today. Again, I applaud those in the Department of Education, and in the borrower-advocacy community, who have worked so hard for this moment.
As a taxpayer, however, I want investigations and accountability.* And corrections to the "broken system" that gave rise to it all.
* How is the $39 billion being scored on the government's books? In the case of the Oregon borrower, she had already paid back nearly all of her original principal and her balance was almost wholly attributable to lender and servicer "mistakes," as the Secretary put it. It was never properly an account receivable and its correction requires no government outlay. A further scoring question: how much of the $39 billion would have duplicated the Biden administration's cancellations under the HEROES Act? To the extent the HEROES cancellations would have zeroed out about half of the eligible borrowers' accounts, it would be duplicative. Because the policy behind the $39 billion was announced months before the HEROES cancellations, it should have been considered current policy and scored to reduce the HEROES cost estimate that the Supreme Court used to convince itself that the HEROES cancellations constituted a "major question." As more and more victimization of borrowers is revealed — wait for discoveries on Parent PLUS loans — it will become apparent that the HEROES cancellations were not so major after all.