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Inside the Education Department’s effort to ‘obstruct’ student loan investigations

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The Education Department is intervening on behalf of student loan servicers, some accused of illegally exploiting borrowers, by declining to turn over information to law enforcement agencies in multiple states investigating the companies, some consumer advocates say.

The department’s reluctance to share data from or about student loan servicers was revealed in documents and correspondence to the Senate education subcommittee recently obtained by NBC News.

“It’s a brazen act of lawlessness,” said Christopher Peterson, a law professor at the University of Utah and former enforcement lawyer at the Consumer Financial Protection Bureau, the government’s consumer watchdog.

“I think they are overinterpreting what their authority is to stop law enforcement,” he added.

Diane Auer Jones, a top adviser to Education Secretary Betsy DeVos, wrote to two Democratic members of Congress on June 24 that “we no longer grant such requests for nonconsensual disclosure of records from entities purporting to exercise regulatory or enforcement power,” a policy the agency says stems from its interpretation of federal law.

The Education Department posted an announcement in March 2018 in the Federal Register arguing that its oversight pre-empts state regulations when it comes to policing the student loan industry, and its responsibility to oversee the nine companies currently contracted to service federal student loans is being undermined by state enforcement.

Sen. Patty Murray, D-Wash., one of the lawmakers who received the letter and a vocal critic of the department under DeVos, said the explanation from Jones gets at the heart of how she believes the department has put the interests of student loan servicers before student borrowers. Those borrowers have paid out billions of dollars in additional interest charges to student loan servicers, lawmakers and advocates say.

“After nearly a year of hiding the truth, Secretary DeVos’ Department of Education finally admitted that it is interfering with law enforcement in order to protect predatory student loan servicers and debt collectors instead of making sure student loan borrowers get treated fairly,” Murray said in a statement. “That’s completely backwards and it tells you all you need to know about Secretary DeVos’ priorities.”

Jones was responding to a Feb. 19 letter from Murray and Rep. Rosa DeLauro, D-Conn., who are on appropriations subcommittees that fund the Education Department, in which they told DeVos that her agency has “historically and appropriately” granted access to student loan-related records.

“However, recent steps by the Department suggest your agency’s previous commitment to information-sharing with law enforcement may no longer be your policy or practice,” the lawmakers said.

More than 20 Democratic state attorneys general, including of California, North Carolina and Pennsylvania, also echoed that concern in a joint letter to DeVos in April, writing that the department’s “recent rejection of requests” is a “sharp departure from its longstanding practice,” and that such information is pivotal in their law enforcement roles to litigate against large-scale fraud, particularly in higher education’s for-profit and debt relief sectors.

Also in April, the head of the Consumer Financial Protection Bureau, which began during the Obama administration collecting tens of thousands of complaints on both private and federal education loan companies, suggested in a letter to Sen. Elizabeth Warren, D-Mass. — who helped establish the consumer bureau almost a decade ago — that the agency has been stifled because “student loan servicers have declined to produce information.”

The Education Department maintains that under the Privacy Act of 1974, it has the discretion of releasing student borrower data shared by its contractors, and that a third party that wants access to those records must go through the department.

The Education Department did not address Jones’ letter in a request for comment, but denied Monday that there is a blanket policy of not sharing data with state law enforcement agencies. If information is being requested as part of an effort to regulate a student loan servicer, and the department believes that regulation is pre-empted by federal law, then the data won’t be released, a spokesman said.

He added that requests are reviewed on a case-by-case basis.

In her letter, Jones said, the department determines whether to release records by seeking “to balance a borrower’s interest in privacy with the need for the record. In addition, before disclosing a record, the Department must ensure that the legal requirements for disclosure have been met.”

Jones also stressed in her letter that federal law can pre-empt state regulations. In recent months, several states, including California, Illinois, Maryland and New York, have adopted rules trying to force loan servicers to comply with state consumer protection or licensing laws.

Liz Hill, an Education Department spokeswoman, said in a previous statement that a “state-by-state approach to regulating federal assets causes confusion for borrowers and makes administration of the loan program more complicated and costly.”

The Student Loan Servicing Alliance, a trade group, has defended the department’s interpretation as “not just good law, it is good policy.”

But student borrower advocates and higher education analysts who spoke with NBC News say the department’s guidance has no legal standing.

“There is no explicit pre-emption of state law with regards to servicer oversight in the Higher Education Act or any other federal law,” said Whitney Barkley-Denney, senior policy counsel at the Center for Responsible Lending, a North Carolina-based nonprofit that studies student loan debt and predatory lending. She added that in the case of loan servicing, “the states have long been recognized as having the power to police corporations and industry on behalf of consumers.”

The tussle between the federal government and states comes as part of a wider shift during the Trump administration to move away from clamping down on student loan servicers and for-profit colleges accused of preying on students. The nation’s student debt crisis has only grown as 45 million student borrowers have seen their collective debt balloon to roughly $1.5 trillion.

Navient Corp., one of the nation’s largest student-loan servicing companies with 12 million customers, is facing at least six lawsuits — from the Consumer Financial Protection Bureau and state attorneys general in California, Illinois, Mississippi, Pennsylvania and Washington — accusing the loan giant of steering struggling borrowers into higher-cost payment plans or overusing forbearance, which allows students to temporarily postpone repayment while still being charged interest. Navient says the allegations in the lawsuits “are false and we are vigorously contesting them in court,” and that it has “helped millions of borrowers” enroll in income-driven repayment plans.

With lawsuits winding through the courts involving student loan servicers, there has been disagreement about whether federal law supplants state and local laws as suggested by the Education Department. Judges reviewing cases in Pennsylvania and Illinois, however, have lent credence to the right for states to hold student loan servicers accountable when it comes to consumer protection.

“So far, courts have given almost no legal weight to the DeVos memo,” Barkley-Denney said.

Meanwhile, the Education Department has received at least 40 law enforcement data requests during this fiscal year, Jones said, and many have been fulfilled. Most requests were related to local agencies investigating individual borrowers rather than broader probes, and some involved the use of subpoenas.

But according to the letter, as of June, still pending were requests for information from the Consumer Financial Protection Bureau, which first contacted the Education Department in January, and the North Carolina Attorney General’s Office, which was initially denied its request last October related to the department’s Public Service Loan Forgiveness program, even though the office made a point to ask for aggregate data and not borrowers’ private information.

The office of Pennsylvania Attorney General Josh Shapiro, who has been among the most aggressive state law enforcement officials in going after predatory student loans, said the data it has sought also refrains from compromising the privacy of borrowers — a concern raised by student loan companies for why records should remain under wraps. The data has included internal documents, policies and procedures, and nationwide loan files.

“We aren’t asking for disclosure of sensitive information, and without this data we are asking for, we cannot fully address ongoing problems with the system as it stands now,” Jacklin Rhoads, Shapiro’s spokeswoman, said.

Seth Frotman, executive director of the Student Borrower Protection Center, a consumer advocacy group, said Jones’ response to lawmakers this summer underscores how “the department is engaged in a calculated, unprecedented effort to obstruct law enforcement officials working to protect borrowers.”

Frotman formed the nonprofit center after abruptly resigning last summer as the Consumer Financial Protection Bureau’s student loan ombudsman in protest of what he believes are harmful policies promoted under the current White House. Under Frotman, the consumer bureau in 2017 filed its lawsuit against Navient, a case that remains held up in red tape.

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Brexit LIVE: Michael Gove to be given major promotion by Boris with key Brexit role

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MICHAEL GOVE is tipped to become Boris Johnson’s new negotiator for post-Brexit trade deals with the EU and with the US as the Prime Minister’s Cabinet prepares to undergo a major transformation following Thursday’s election victory.

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What a second term Trump presidency would mean for the future of a China trade deal

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Following the news that a phase one China trade deal had been forged, President Donald Trump tweeted that phase two negotiations would begin “immediately,” rather than after the 2020 election, as he had suggested in recent days.

Trade and market experts cautioned, though, that although the phase one deal included key market concerns such as some tariff reductions and a cancellation of sanctions on consumer goods that had been set to kick in on Sunday, it would take time to tackle more entrenched challenges such as forced technology transfers and Chinese state subsidies of key industries.

“Structural issues like subsidies and the role of state-owned enterprises must wait for additional phases of negotiations,” said Doug Barry, spokesman for the U.S.-China Business Council, adding, “The hope is that both sides will leverage the goodwill generated by this initial phase and build on it with additional agreements that level the playing field for U.S. companies.”

Many expressed skepticism that negotiators would reach a resolution before next November, though. “Trump and his advisers might still talk about trying for a phase two deal aimed at tackling China’s subsidies, but even they must realize now that it’s not going to happen,” said Mark Williams, chief Asia economist at Capital Economics. “China has no interest in changing course on any of this,” he said.

Chinese leader Xi Jinping’s major economic plans such as “The Belt and Road Initiative” and “Made in China 2025” depend on practices American negotiators — and executives — see as trade deal breakers.

“If you include in phase two a lot of the really contentious issues, trade in advanced technology, investment — I just don’t see any way that can be resolved in the short run and possibly not even after the election,” said Peter Petri, a professor of international finance at the Brandeis International Business School. “They’re really fundamental to the differing strategies of the two countries.”

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The White House decision to pull out of the Trans-Pacific Partnership cost the U.S. the kind of leverage it needed to effectively pressure Beijing. “Usually, in dealing with China, their hand is best forced when they’re approached by a large contingent of other countries, but so far, we’ve approached them alone,” said Jeff Mills, chief investment officer of Bryn Mawr Trust. “I think that makes it more difficult for us to make progress on some of those larger issues.”

Some experts say that regardless of the outcome of the 2020 election, these issues are likely to remain entrenched — and that a second-term Trump presidency could add unpredictability and market risk.

“The China issue isn’t going away, and it’s not going to go away if we have another Trump presidency or if we have a Democrat,” said Monica de Bolle, a senior fellow at the Peterson Institute for International Economics. “These are all issues that are going to be with us for the long haul.”

One particular hurdle to forging a sweeping trade pact would be Beijing’s unwillingness to commit publicly to a deal with a president who has a habit of making pronouncements or commitments only to reverse them later, and who has threatened tariffs against economic and diplomatic allies over non-trade-related disputes.

“People won’t trust his delivery,” Petri said. “Trump is very keen both on the unpredictability of it and on using tariffs to gain negotiating leverage.”

To the extent that Trump views re-election as a mandate from the American people to get tough on China, experts warn that he could pursue a protectionist agenda without fearing repercussions from any economic fallout.

“If President Trump is re-elected, I expect the trade war with China will reintensify next year,” said Mark Zandi, chief economist at Moody’s Analytics. “The president will view his reelection as a green light to take another crack at China’s trade practices. This will remain a cloud over the American economy,” he said.

“I think he would definitely be emboldened and he will continue to be ‘tariff man’ because he thinks they’re effective,” de Bolle said. “The fact that he wants to appear as if he’s playing nice with China now has absolutely no bearing on what he’ll do if he gets re-elected.”

This has implications not only for policymakers, but for corporate America, which has by and large been holding off on big investments until more clarity on trade emerges — clarity that could remain elusive in a second-term Trump presidency. “A big uncertainty facing [the] business community is that a re-elected Trump could go either way,” said David Dollar, a senior fellow at the Brookings Institution.

“To the extent he remains in office and runs trade policy as he seems to be doing… there will be this on-and-off-again character that drives businesses mad,” Petri said. “It’s very difficult to plan and invest in this kind of environment.”

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Trump says he sees political benefit in dragging out impeachment trial

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WASHINGTON — Shortly after the House Judiciary Committee voted to impeach President Donald Trump, the president accused Democrats of “trivializing impeachment” — and said that he would like to see the impeachment process dragged out longer

“It’s a very sad thing for our country, but it seems to be very good for me politically,” Trump told reporters at the White House before a meeting with the president of Paraguay. He claimed “the polls have gone through the roof for Trump … especially with independent voters, and especially in swing states. I could show you numbers that nobody has ever seen numbers like this before.”

It was unclear what polls Trump is referring to, but in Monmouth University poll released Wednesday, 45 percent of Americans said Trump should be impeached and removed from office while 50 percent disagreed — little changed since news of the Ukraine controversy broke. In the key swing state of Wisconsin, 40 percent of voters said Trump should be impeached and removed from office, versus 52 percent who disagree, according to a Marquette Law poll released Thursday.

Senate Majority Leader Mitch McConnell has been pushing for a shorter trial with limited witnesses, and many Republican members questioning the wisdom of having President Donald Trump call witnesses and are instead discussing a speedy resolution. But Trump said he might prefer a longer process where he calls the whistleblower to testify.

“I’ll do long or short. I’ve heard Mitch, I’ve heard Lindsey [Graham], I think they are very much in agreement on some concept,” Trump said. “I’ll do whatever they want to do. It doesn’t matter. I wouldn’t mind the long process, because I’d like to see the whistleblower, who’s a fraud, having the whistleblower called to testify in the Senate trial.”

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But the weight of impeachment appeared to still be weighing on him. He said he watched “quite a bit” of the proceedings yesterday, calling the members of the media reporting on the Ukraine controversy “bad people, sick people.” He said Democrats are “making fools of themselves,” and warned of payback.

“It’s a scam, it’s something that shouldn’t be allowed, and it’s a very bad thing for our country, and you’re trivializing impeachment,” Trump said. “And I’ll tell you what. Someday, there’ll be a Democrat president, and there’ll be a Republican House, and I suspect they’re gonna remember it.”

Trump has been increasingly taking his rebuttal to Twitter. After sending out a record number of tweets on Thursday, his tweetstorm continued on Friday morning with praise for the Republican “warriors” who defended him in the House Judiciary Committee meetings, and criticism of House Speaker Nancy Pelosi.

“The Republicans House members were fantastic yesterday. It always helps to have a much better case, in fact the Dems have no case at all, but the unity & sheer brilliance of these Republican warriors, all of them, was a beautiful sight to see. Dems had no answers and wanted out!” Trump tweeted.

The tweet was the first of seven posts (as of 8:30 a.m.) he had so far written since 6:00 a.m. Friday morning.

Just a day earlier, Trump tweeted or retweeted more than 115 times — most of them centered on impeachment. The president has been even more prolific than usual on Twitter in recent days: On Sunday, he tweeted and retweeted 105 times.

The president went on to tweet Friday a boast about his poll numbers, called the impeachment case against him a “total hoax” and claimed that Pelosi had “admitted yesterday that she began this scam 2 1/2 years ago!”

At the White House later, he said the impeachment effort had “started a long time ago, probably before I came down the escalator with the future First Lady” to announce his presidential run in 2015.

The claims were based on a mischaracterization of comments Pelosi made about impeachment earlier this week.

At an event Tuesday afternoon at Politico’s “Women Rule” summit, Pelosi was asked to react to the criticism that Democrats are racing through their impeachment inquiry of the president. “It’s been going on for 22 months, two-and-a-half years actually,” Pelosi said initially. She then made clear she was referring to the Mueller investigation.

Trump also tweeted criticism Friday of CNN and MSNBC, and praise for Fox News Channel.

Mitch Felan contributed.



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