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The Trump administration is considering a plan to block states from policing the trillion-dollar federal student loan industry. That's according to a memo obtained by NPR. It has not been made public yet. It comes from Betsy DeVos, head of the U.S. Education Department. NPR's Chris Arnold reports.
CHRIS ARNOLD, BYLINE: Student loan debt collectors have been accused of deceiving and abusing student borrowers. They've been sued by state prosecutors around the country. But it looks like help is on the way - that is, help for the debt collectors. This internal document argues that basically states should be barred from regulating and prosecuting the student loan industry. Massachusetts Attorney General Maura Healey...
MAURA HEALEY: What this memo signals is that they want to stop states like Massachusetts from holding companies accountable for ripping off students with predatory loan servicing practices.
ARNOLD: Healey is among state AGs who filed lawsuits against the debt collectors. She says there are all kinds of abuses going on and not just involving loans to students at traditional colleges.
HEALEY: They work with some of these for-profit predatory schools frankly through high sales pressure tactics, get people to sign up for courses, for schools, take on boatloads of debt and then leave them high and dry with worthless degrees.
ARNOLD: State and federal investigators have found that student loan debt collectors also mismanaged the payments that people make. So for example, a public schoolteacher might qualify to get a big chunk of his or her loan forgiven because they're doing public service work. But that doesn't happen, and the schoolteacher has to keep paying off the loan.
CHRISTOPHER PETERSON: They had tens of thousands of dollars of loans that should have been forgiven.
ARNOLD: Christopher Peterson is a former enforcement attorney at the Consumer Financial Protection Bureau. That's the federal regulator for student loans. He says Trump's Education Department no longer works closely with regulators, and that's a radical change. The industry has been lobbying for federal law to apply to federal student loans, which are the bulk of the student loans. Debra Chromy is the president of the Education Finance Council, which represents companies that manage loans and collect payments.
DEBRA CHROMY: We're just concerned that we may end up with this patchwork of 50 different state laws. Everyone is a little bit different. These are federal student loans. Why not have that all managed at the federal level?
ARNOLD: But Peterson says the Trump administration has already moved to thwart federal oversight of the industry. It recently ended an information sharing arrangement with his old agency, the Consumer Protection Bureau. He says that makes it harder for the CFPB to police student loans. And now there's this internal document which was first reported by Bloomberg.
PETERSON: Now we're finding out that the Trump administration is also going to attempt to shut down all oversight and regulation by state governments. It appears that the Trump administration doesn't want anyone to focus on whether or not the debt collectors are treating student loan borrowers fairly.
ARNOLD: The Department of Education declined to comment. Twenty-six state AGs including some Republicans have already sent a letter to Education secretary DeVos urging her not to move to, quote, "interfere with the traditional police power of states to protect their own residents." If DeVos moves ahead anyway and the draft becomes official policy, it would serve as guidance, but it wouldn't be the last word. State AGs say they'll still bring their lawsuits, and judges could still side with them. Chris Arnold, NPR News.
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