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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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Hillary Clinton attacks 'authoritarian leader' Boris before saying she ‘fears' for Brits

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HILLARY CLINTON blasted Boris Johnson as an “authoritarian leader” in a shocking attack as she claimed she “fears” for the UK.

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‘Of course’ Trump was wrong to ask China to probe Bidens

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Sen. Ted Cruz said Sunday that it was wrong for President Donald Trump to call on China to probe former Vice President Joe Biden and his son in the Texas Republican’s most direct rebuke of the president yet.

Asked on CBS’s “Face the Nation” whether Trump’s comments were “appropriate,” Cruz said “of course not.”

“Elections in the U.S. should be decided by Americans and it’s not the business of foreign countries, any foreign countries, to be interfering in our elections,” he said.

“Face the Nation” host Margaret Brennan then asked if it was improper for Trump to ask Ukraine to probe the Bidens, as he did in a July 25 call with Ukrainian President Volodymyr Zelenskiy — a call that is now at the center of an impeachment inquiry.

“Listen, foreign countries should stay out of American elections,” Cruz said. “That’s true for Russia. That’s true for Ukraine. That’s true for China. That’s true for all of them. It should be the American people deciding elections. I don’t know what [Trump’s personal attorney Rudy Giuliani has] been saying. I do know though that we should decide our elections. It should be the American people making those decisions.”

But Cruz added that it would make “sense” for Giuliani, who is at the center of the president’s campaign to have Ukraine investigate the Bidens, testify before the Senate Judiciary Committee. Senate Judiciary Committee Chairman Lindsey Graham, R-S.C., has already invited Giuliani to do so.

“I’d like to see Rudy testify,” Cruz said. “Yes.”

Cruz’s comments come as Republicans have struggled to align on their responses to Trump’s requests to have Chinese and Ukrainian officials investigate the former vice president and his son. Some Republicans defended Trump’s China remarks by saying the president wasn’t “serious” despite Trump never having indicated he was joking.

Asked Thursday about whether he was serious about calling on China to investigate the Bidens, Trump said, “China has to do whatever they want.”

“If they want to look into something, they can look into it,” the president continued. “If they don’t want to look into it, they don’t have to. Frankly, are far as I’m concerned, if China wants to look into something, I think that’s great. And if they don’t want to, I think that’s great too. That’s up to China.”

Treasury Secretary Steven Mnuchin said he “can’t comment” on whether Trump was serious in his ask to have China investigate the Biden family.

“I can’t comment on whether he was serious or not,” Mnuchin said, adding that the topic had not been brought up in trade negotiations between the two countries. “And in the Oval Office, when the president was asked about this in front of the Vice Premier, the president made very clear, they can do what they want. So, again, people who are trying to imply that the president is asking for things or quid pro quos, I think this is ridiculous.”

The president began ramping up his push to have China probe Hunter’s business dealings this month in the face of House Democrats’ rapidly escalating impeachment probe.

“China should start an investigation into the Bidens because what happened in China is just about as bad as what happened with Ukraine,” Trump told reporters outside the White House earlier this month.

The president has repeatedly accused the former vice president’s son of using a 2013 trip on Air Force Two with his father to procure $1.5 billion from China for a private equity fund he had started. There has been no evidence of corruption on behalf of either Biden. The Washington Post found Trump’s claims false. And a spokesman for Hunter Biden said he did not acquire an equity interest in the fund until 2017, after his father had left office. Meanwhile, Hunter’s total capitalization from the fund at the time amounted to about $4.2 million, not the $1.5 billion Trump alleged.

On Sunday, Hunter announced through his attorney that he would step down from the Chinese-backed firm by the end of the month. Hunter’s attorney, George Mesires, wrote that the former vice president’s son “never anticipated the barrage of false charges against both him and his father by the president of the United States.”



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Brexit countdown: EU gives Boris 48 HOURS to strike deal – 'Significant work to be done'

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BORIS JOHNSON has been given a tight deadline of only 48 hours to secure an agreement with the EU as the scheduled October 31 withdrawal deadline creeps closer.

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