Valentine’s Day Is Over Yet Trump Education Secretary Betsy DeVos Is Handing Out Sweetheart Deals for Student Loan Servicers

Congressional Hearings Should Be Held Immediately On The Gross Mismanagement and Potential Fraud In The $1.4 Trillion Federal Student Loan Program 


WASHINGTON, D.C. – Consumer advocacy group Allied Progress is calling on Congress to immediately convene hearings on the reported abuses by Navient and their student loan servicer colleagues and the abject failure of the Trump administration, specifically Education Secretary Betsy DeVos, to properly police them.

Yesterday, the Department of Education (DOE) Inspector General’s Office issued a scathing report revealing the department’s student loan arm, the Office of Federal Student Aid (FSA), failed to properly oversee all nine student loan servicers that handle the accounts of over 42 million student loan borrowers. The audit directly contradicted the administration’s arguments that borrowers receive excellent customer service and protection from substandard practices, stating the DOE is “not holding servicers accountable…[giving] the impression that it is not concerned with servicer noncompliance with Federal loan servicing requirements, including protecting borrowers’ rights.” The DOE IG even went so far as to state that basic requirements for forbearances, deferments, and income-based repayment weren’t being relayed to borrowers in more than 61% of the FSA-reviewed cases.

“Here we go again. President Trump and Betsy DeVos have displayed a pattern of putting the interests of their wealthy friends in the student loan industry above the needs of borrowers and this damning report from their own Department of Education proves it.” said Patrice Snow, spokeswoman for Allied Progress.

Snow continued, “Congress cannot let this kind of abuse stand. Many student borrowers are already vulnerable, living on the financial edge. They more than anybody else deserve congressional oversight hearings to determine if companies like Navient are being protected from scrutiny by President Trump and Secretary DeVos.” 

Since Trump came to office, DeVos has strategically protected companies like Navient thru non-enforcement of federal guidelines while weakening state Attorney Generals’ authority to investigate and sue servicers through state consumer protection laws. In December, Sen. Patty Murray, the Ranking Member of the Senate HELP Committee, along with 24 of her Senate Democratic colleagues wrote a letter to DeVos imploring the DOE to ensure student loan servicers were not just following the law but operating in the best interests of borrowers. 

WHAT YOU NEED TO KNOW:

The Education Department’s Inspector General Has Found That All Student Loan Servicers Are Flouting Federal Rules, And FSA Is Doing Little To Stop Them

The Education Department’s Inspector General Found That FSA Has “Rarely Held Servicers Accountable,” Which “Harms Students And Their Families”

The Education Department’s Inspector General Just Issued A “Critical New Report” On How The Office Of Federal Student Aid (FSA) “Failed To Adequately Supervise” Student Loan Servicers, “Rarely Penalizing Them” For Not Complying With Federal Requirements. “A critical new report from the U.S. Department of Education’s Office of Inspector General finds the department’s student loan unit failed to adequately supervise the companies it pays to manage the nation’s trillion-dollar portfolio of federal student loans. The report also rebukes the department’s office of Federal Student Aid for rarely penalizing companies that failed to follow the rules.” [Cory Turner, “Federal Watchdog Issues Scathing Report On Ed Department’s Handling Of Student Loans,”NPR, 02/14/19]

  • The Report Also Found That FSA Did Not Make Adequate Efforts To “Identify Broader Patterns Of Noncompliance That Could Have Hurt Many More Students” Than The Few Incidents The Office Chose To Document.“Among the inspector general’s findings: While FSA did document servicers’ many failures to follow the rules, it did not study these isolated failures to identify broader patterns of noncompliance that could have hurt many more students.” [Cory Turner, “Federal Watchdog Issues Scathing Report On Ed Department’s Handling Of Student Loans,”NPR, 02/14/19]
  • The Report Analyzed Records From January 2015 Through September 2017.“The Education Department’s independent watchdog reviewed FSA oversight records from January 2015 through September 2017, a period that includes both the Obama and Trump administrations.”

The Education Department’s Inspector General Found That Federal Student Aid (FSA) Has “Rarely Held Servicers Accountable” 

ED’s Inspector General Found That FSA Didn’t Adequately Track Servicers’ Noncompliance With Federal Requirements And “Rarely Held Servicers Accountable.” The Education Department’s Inspector General found in a February 12, 2019 report that, “FSA Did Not Track All Identified Instances of Noncompliance and Rarely Held Servicers Accountable for Noncompliance with Requirements.” [“Federal Student Aid: Additional Actions Needed to Mitigate the Risk of Servicer Noncompliance with Requirements for Servicing Federally Held Student Loans,” U.S. Department of Education, 02/12/19]

The Education Department’s Inspector General Found That FSA Was Allowing Servicers To Engage In Behavior That “Harms Students And Their Families,” Including Mishandling Income-Driven Repayment Plans 

ED’s Inspector General Argued That FSA Was Allowing Servicers To Engage In “Continued Noncompliance That Harms Students And Their Families.” “By rarely holding servicers accountable for instances of noncompliance with Federal loan servicing requirements, FSA is not providing servicers with incentive to take actions to mitigate the risk of continued noncompliance that harms students and their families. Failure by servicers to take appropriate corrective actions could lead to borrowers not receiving the most favorable repayment terms that should have been available to them. Additionally, FSA’s not holding servicers accountable could lead to servicers being paid more than they should be (the contracts with servicers allow FSA to recover amounts paid for loans not serviced in compliance with requirements).” [“Federal Student Aid: Additional Actions Needed to Mitigate the Risk of Servicer Noncompliance with Requirements for Servicing Federally Held Student Loans,” U.S. Department of Education, 02/12/19] 

ED’s Inspector General Found That Servicers Were Withholding Easier Repayment Plans From Borrower And Possibly Being Paid More Than Their Contracts Specified. “[…][B]orrowers might not have received the most favorable repayment terms available to them, and servicers might have been paid more than they should have been under their contracts.” [“Federal Student Aid: Additional Actions Needed to Mitigate the Risk of Servicer Noncompliance with Requirements for Servicing Federally Held Student Loans,” U.S. Department of Education, 02/12/19]

ED’s Inspector General Found That All Servicers Were “Not Sufficiently Informing Borrowers About Available Repayment Options.” “Servicer Representatives Not Sufficiently Informing Borrowers of Available Repayment Options […] From January 2015 through September 2017, monthly reports on FSA’s monitoring activities disclosed recurring instances at all servicers of servicer representatives not sufficiently informing borrowers about available repayment options.” [“Federal Student Aid: Additional Actions Needed to Mitigate the Risk of Servicer Noncompliance with Requirements for Servicing Federally Held Student Loans,” U.S. Department of Education, 02/12/19]

ED’s Inspector General Found That All Servicers Were “Not Correctly Calculating Borrowers’ Monthly Payment Amounts Under Income-Driven Repayment Plans.” “Income-Driven Payment Amounts Not Correctly Calculated […] From January 2015 through September 2017, reports on FSA’s monitoring activities (Financial Institution Oversight Service reviews, process monitoring team reviews, servicer liaison reviews, and reviews of audit reports on servicers’ systems of internal control) disclosed recurring instances of servicers not correctly calculating borrowers’ monthly payment amounts under income-driven repayment plans. FSA identified such noncompliance at seven servicers—at four more than once.” [“Federal Student Aid: Additional Actions Needed to Mitigate the Risk of Servicer Noncompliance with Requirements for Servicing Federally Held Student Loans,” U.S. Department of Education, 02/12/19]

The Education Department’s Inspector General Found That, Although All Servicers Were Flouting Federal Rules, FSA Never Punished Them By Revoking Federal Dollars Or Reducing Servicers’ Loan Allotments

The Education Department’s Inspector General Found Widespread Noncompliance With Federal Requirements Among All Servicers And That FSA Was Not Doing Enough To Monitor Them

ED’s Inspector General Found That 61% Of “Reports On FSA’s Oversight Activities Identified Instances Of Servicer Noncompliance.” “However, we disagree with FSA’s statement that the risk of servicer noncompliance is not broad. As stated in this finding, from January 1, 2015, through September 30, 2017, 61 percent (210) of 343 reports on FSA’s servicer oversight activities identified instances of servicer noncompliance with Federal loan servicing requirements.” [“Federal Student Aid: Additional Actions Needed to Mitigate the Risk of Servicer Noncompliance with Requirements for Servicing Federally Held Student Loans,” U.S. Department of Education, 02/12/19]

The Reports Found “Noncompliance By All Nine Servicers,” Including Consumer Protection, Income-Driven Repayment, Interest Rates. “These reports disclosed noncompliance by all nine servicers and recurring instances of noncompliance by some servicers. These instances included failure to comply with requirements relevant to forbearances, deferments, income-driven repayment, interest rates, due diligence, and consumer protection.” [“Federal Student Aid: Additional Actions Needed to Mitigate the Risk of Servicer Noncompliance with Requirements for Servicing Federally Held Student Loans,” U.S. Department of Education, 02/12/19]

ED’s Inspector General Found That FSA Was Not Tracking Enough Information To Accurately Disclose Patterns In Servicer Noncompliance. “FSA Did Not Track All Information Necessary to Identify Trends in Servicer Noncompliance with Federal Requirements.” [“Federal Student Aid: Additional Actions Needed to Mitigate the Risk of Servicer Noncompliance with Requirements for Servicing Federally Held Student Loans,” U.S. Department of Education, 02/12/19]

The Education Department’s Inspector General Found That FSA Has Required Noncompliant Servicers To Return Funds To Taxpayers Only Four Times

ED’s Inspector General Found Only 4 Times That FSA Required Servicers To Return Funds To The Federal Government After They Failed To Meet Servicing Requirements. “Contractual Accountability Provisions Rarely Used […] FSA provided us with evidence of only four instances, affecting three servicers, in the past 5 years in which it required a servicer to return funds to the Federal government for failure to service loans in compliance with Federal requirements.” [“Federal Student Aid: Additional Actions Needed to Mitigate the Risk of Servicer Noncompliance with Requirements for Servicing Federally Held Student Loans,” U.S. Department of Education, 02/12/19]

The Education Department’s Inspector General Found That FSA Never Took Loans Away From Noncompliant Servicers

ED’s Inspector General Found That FSA Never Punished A Noncompliant Servicer By Reducing Its Allotment Of Loans. “FSA has not adjusted the number of new loans assigned to a servicer or transferred a noncompliant servicer’s current loan volume to another servicer because of a servicer’s noncompliance with Federal loan servicing requirements.” [“Federal Student Aid: Additional Actions Needed to Mitigate the Risk of Servicer Noncompliance with Requirements for Servicing Federally Held Student Loans,” U.S. Department of Education, 02/12/19]

The Education Department’s Inspector General Has Argued That FSA Should Better Uphold Servicers’ Contractual Obligations To The Federal Government

The Education Department’s Inspector General Has Recommended That FSA Actually Holds Servicers Accountable For Their Contracts With The Federal Government

ED’s Inspector General Recommended That FSA Holds Servicers More Accountable For Their Contractual Obligations To The Federal Government. “Use the contractual accountability provisions available, such as requiring the return of funds or reducing future loan volume, to hold servicers accountable for instances of noncompliance.” [“Federal Student Aid: Additional Actions Needed to Mitigate the Risk of Servicer Noncompliance with Requirements for Servicing Federally Held Student Loans,” U.S. Department of Education, 02/12/19] 

ED’s Inspector General Recommended That FSA Track All Forms Of Servicer Noncompliance. “Track all instances of noncompliance identified during FSA reviews, regardless of whether the specific instances were corrected and did not require further action to be taken by either the servicer or FSA.” [“Federal Student Aid: Additional Actions Needed to Mitigate the Risk of Servicer Noncompliance with Requirements for Servicing Federally Held Student Loans,” U.S. Department of Education, 02/12/19]

ED’s Inspector General Recommended That FSA More Effectively Analyze Noncompliance Among Servicers In Order To Hold Them More Accountable. “Analyze the records relevant to noncompliance, identify trends and recurring noncompliance for each servicer and across all servicers, and use the information as a basis for assessing servicer performance.” [“Federal Student Aid: Additional Actions Needed to Mitigate the Risk of Servicer Noncompliance with Requirements for Servicing Federally Held Student Loans,” U.S. Department of Education, 02/12/19]

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