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Federal Student Loans: Department of Education Repeals Trump-Era Policy Restricting State Oversight of Student Loan Service Companies and Debt Collectors

Richard Cordray, the head of the federal student aid bureau, announced new guidelines on Friday that he said would “make it easier” for attorneys general and state regulators to obtain information from the FSA and companies they the Department of Education is hiring to manage the federal student loan program.

The new direction is a reversal of the government’s approach to regulating student loan companies, after then-secretary Betsy DeVos’ Department of Education argued that the federal government should monitor the system since loans are federal assets and fought to reduce state involvement in surveillance.

In 2017, the FSA issued a memo directing loan service companies to send requests for information from state attorneys general or another third party to the FSA, which typically rejected them. The states then took legal action against the FSA and its loan companies to obtain the information. The Trump administration has also fought state control in court, leading Democratic attorneys general to accuse the administration of obstructing investigations and ultimately harming borrowers.

The FSA’s new approach, Cordray said, will be to review data requests from state and local agencies and financial regulators “promptly and approve them whenever possible.”

“States and regulators need information when they believe a loan service company might be in violation of a law or regulation. To be sure, they should look at company policies and procedures, their manuals, customer complaints, and anything that shows how the business operates. Getting information from us helps state officials better enforce their laws that protect federal student loan borrowers, Cordray wrote in a blog post.

“It is time for us to be a partner, not a roadblock,” he added.

The senior Republican on the House Education and Labor Committee argued that Cordray’s new guidelines “bend to the whims of state-based Democratic politicians who are more interested in bankrupting companies than ‘help troubled student loan borrowers.’

“Congress charges the FSA with the duty of managing the federal student loan program for a reason. Federal programs need federal leadership. Yet COO Cordray’s first order of business is to shift its responsibilities to others. “said GOP Representative Virginia Foxx of North Carolina. A declaration.

The new federal student aid policy is one of many changes the Biden administration has made to Department of Education policy. In March, the ministry rolled back a controversial Trump-era policy that will lead to the cancellation of approximately $ 1 billion in student debt for borrowers who have been defrauded by their colleges.

The Biden administration, however, still faces pressure from some Congressional Democrats to write off $ 50,000 in federal student loan debt per borrower. Advocacy groups are also calling for a complete overhaul of the current borrower advocacy process.

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