Thursday, April 27, 2017
Oversight of the Federal Role in Higher Education Finance Appears to Be in Flux by Jonathan D. Glater
Earlier this month, the new secretary of education, Betsy DeVos, issued a memorandum withdrawing two Obama-era memoranda that, among other things, had directed the attention of the Education Department to attend to the quality of student loan servicing. It is not entirely clear yet what the effect of the policy change will be.
But the Department is not the only player. The deadline expired on Monday for comments requested by the Consumer Financial Protection Bureau on the need for the agency to gather information from student loan servicers, the businesses that manage loans made through the Education Department’s Direct Loan program.
The independent CFPB, created by legislation passed in the wake of the financial crisis, proposed that it collect information including data on loan volume, types of loans serviced, repayment plans used by borrowers, loan status (for example, in school, in repayment, in deferment, in forbearance), and borrower defaults. (In the interest of disclosure, your author signed onto a letter supporting the CFPB in its effort.)
Perhaps to bolster the argument for additional data collection, the CFPB today released a supervisory report describing unfair and deceptive practices identified in an investigation of student loan servicers.
The CFPB’s authority to gather information is not unlimited and sailing has not been smooth. A three-judge panel of the Court of Appeals for the District of Columbia Circuit dealt the agency a setback last week by ruling that it did not properly support a demand for information from the Accrediting Council for Independent Colleges and Schools, which accredits for-profit colleges.
The CFPB’s “civil investigative demand,” which is unrelated to the proposed data collection from servicers, had asked for information related to “unlawful acts and practices in connection with accrediting for-profit colleges.” In the view of the judges, this was just too broad; the agency did not “state adequately the unlawful conduct under investigation or the applicable law.”
The full opinion, which is narrower than the lower court decision that it affirmed, is here. The appellate panel left open the possibility that the CFPB could revise its demand for information and try again.
These are potentially difficult times for would-be aggressive regulators of business conduct, as Gary Rivlin of The New York Times recently warned. The CFPB may not get much support from the Trump Administration.
The combination of changes in policy at the Education Department, investigative initiatives at the CFPB, and resistance from businesses, suggests that student loans, and specifically student loan servicing, will continue to be a hot topic.