WASHINGTON—A cross section of labor and community groups has written to 56 state attorneys general and state banking commissioners to demand immediate action to protect students and families and prevent an imminent financial catastrophe on the scale of the mortgage crisis.
The letter urges attorneys general, state regulators and the Consumer Financial Protection Bureau to use their power to clean up the mess left behind by Education Secretary Betsy DeVos and the Department of Education, which earlier this month abandoned 40 million student loan borrowers by winding back borrower protections.
It asks states and the bureau to commit to an industrywide investigation and sue servicers to make harmed consumers whole, develop enforceable nationwide servicing standards and ensure servicers adhere to clear standards that protect borrowers against further abuse.
If regulators fail to do so, the millions of distressed borrowers who have defaulted on their student loans multiple times will never escape their status unless they’re able to pay the full amount they owe—an impossibility for most borrowers. Their predicament mirrors that of mortgage holders in the lead-up to the global recession.
This week, attorneys general in 20 states and the District of Columbia wrote to the Education Department to demand action on the crisis.
AFT President Randi Weingarten said: "Students need protections from predatory lenders like Navient—and stripping those protections as Secretary DeVos has done shows the Trump administration is on the side of lenders and the bad actors rather than those trying to make it in America.
“It’s a betrayal—not just of borrowers but of what Trump promised in his campaign—to address student debt issues. State regulators, who already have the authority to act, need to urgently fill the void left by the department’s callous actions. If these regulators fail to do so, 44 million student borrowers will continue to be fleeced by an unregulated market where servicers get to play by their own rules.”