This Week In Washington
Democratic state attorneys general and consumer advocates scored a victory on Wednesday when a federal judge ruled that the US Department of Education’s (ED) decision to delay the Obama-era borrower defense to repayment (DTR) regulations was unlawful. Recall, ED delayed the original DTR regulations twice so that ED could renegotiate a new set of regulations. However, when ED delayed the rules, it simply announced the delay and did not go through a rulemaking process. The judge this week said ED’s actions were “procedurally invalid,” and that ED had deprived plaintiffs of “several concrete benefits.” A hearing was set for today at 10:30 a.m. to determine what remedy will be provided to the plaintiffs.
Mick Mulvaney, the acting director of the Consumer Financial Protection Bureau (CFPB) and the director of the Office of Management and Budget, told CNBC that students have a disconnect between getting a loan to pay for college and repaying that loan. He expressed concern about college students not paying back their loans saying, “If we teach an entire generation of people that the first major loan they take out, they don't have to pay back, I'm worried about the long-term impact of that.” Some argue, however, that his concern stands in contrast with his actions as the CFPB director, arguing that he has weakened protections for student borrowers.
Senators Richard “Dick” Durbin (D-IL) and Ron Wyden (D-OR) sent a letter to Treasury Secretary Steven Mnuchin and the Internal Revenue Service (IRS) asking them not to count discharged student loans as income for borrowers who attended the now-defunct ITT Tech. The letter cites as precedent previous guidance doing the same for borrower defense claims processed for Corinthian Colleges. While Senate Democrats have not released any official text for their ideas on reauthorization of the Higher Education Act, the policy to not count discharged student loan debt as taxable income will likely appear in whatever proposal they put forward.
Citing the recently reported departure of the CFPB Student Loan Ombudsman, Representative Ron Kind (D-WI) requested the CFPB’s Office of the Inspector General (OIG) open an investigation into political appointees at the CFPB undercutting career staff who were working for the interests of student borrowers. Recall, the student loan ombudsman had alleged that the political leadership in CFPB was “shielding bad actors from scrutiny,” and Rep. Kind wants an investigation to ensure “students and families . . . never fall prey to the corruption and exploitation of politically-motivated actors . . . [and] nobody is the victim of predatory lending and misinformation.” There were no cosigners on his letter, and the OIG is not required to open an investigation.
After conducting a comprehensive review of court records involving ED and state servicers, POLITICO concluded (subscription required) that ED is “helping some of the nation’s largest student loan companies as they seek to fend off allegations of cheating and misleading borrowers,” and ED “has thrown roadblocks in front of state law enforcement officials and federal regulators who are pursuing legal action against [servicers].” The article outlines the numerous times ED has intervened to prevent states from regulating servicers or sought to block states and other enforcement entities from even obtaining information regarding federal student loans. You can read our coverage of some of these issues from March, May, May (again), and July.
News You Can Use
U.S. News and World Report changed it ranking formula for its 2019 Best Colleges edition to give more weight to institutions who enroll and graduate more students from low income backgrounds. There are no reports that this formula change will be adopted by its other rankings lists, such as the “Best Law School” rankings.
Above the Law offers some advice for attorneys looking to utilize the Public Service Loan Forgiveness program.
The following bill(s) have been recently introduced for consideration by the 115th Congress (2017-2018):
H.R. 6767 – [Rep. Erik Paulsen (R-MN-03] would allow qualified education loan repayments from 529 college savings plans.