Press Release  AG Healey to Congress: Don’t Give Student Loan Servicing Companies a Free Pass to Cheat Students

Boston — Attorney General Maura Healey today joined a bipartisan coalition of 30 attorneys general in a letter urging Congress to reject legislation that would block states from preventing and combatting fraud and abuse by the student loan industry.

According to the letter, the pending version of the Higher Education Act reauthorization (H.R. 4508, also known as the PROSPER Act), includes language to preempt state level oversight of private companies that originate, service, or collect on student loans. As drafted, the language attempts to immunize the student loan industry from the state-level enforcement and reforms underway across the country.

Describing the language as “an all-out assault on states’ rights and basic principles of federalism,” the attorneys general urge Congress to strip the language from House bill and to omit it from consideration in the Senate.

“With a million students a year defaulting on federal loans, the last thing we need is to give the loan servicing industry a free pass to abuse borrowers and break the law,” AG Healey said. “Today I’m joining with a bipartisan group of my colleagues and calling on Congress to reject this proposal to undermine our state authority to hold student loan servicers accountable.”

Today’s letter follows a similar bipartisan effort in October, in which state officials from across the country called on the U.S. Department of Education to reject requests by the student loan servicing industry to be immune from state law.

In recent years, state attorneys general have investigated significant, far-reaching abuses in the student loan industry and won settlements returning tens of millions of dollars to student borrowers. AG Healey’s major actions against student loan abuses have recently included:

• Pennsylvania Higher Education Assistance Agency: AG Healey sued PHEAA, one of the largest federal student loan servicers, to protect student loan borrowers and public servants in Massachusetts. The complaint alleges that PHEAA’s widespread servicing failures violated state law by preventing borrowers from staying on track with income-driven repayment plans and loan forgiveness programs.
• ACS Education Services: AG Healey secured $2.4 million from national loan servicer ACS for failing to properly process federal income-driven repayment applications submitted by struggling Massachusetts students.
• DeVry University: DeVry lured students with ads that exaggerated graduates’ success in finding employment at graduation and contained inadequately substantiated claims about graduates’ salary success. The FTC and other state regulators obtained more than $100 million in refunds and debt relief for former students. In July 2017, AG Healey obtained an additional $455,000 in refunds from DeVry for affected students in Massachusetts.
• American Career Institute (ACI): AG Healey persuaded the U.S. Department of Education to take unprecedented action in granting a group discharge to all ACI borrowers on the basis of school misconduct. The combined loan discharges for ACI students is valued at nearly $30 million.
• Corinthian Colleges: Attorneys general uncovered widespread misconduct at the now-defunct Corinthian Colleges and obtained federal student loan relief for tens of thousands of defrauded students nationwide. After the Massachusetts AG’s Office shared its investigative findings, the U.S. Department of Education announced in March 2016 that over 2,000 borrowers could apply for loan discharge. In August 2016, Massachusetts Superior Court found Corinthian liable for violating state law, following a lawsuit filed by AG Healey against the school in April 2014. 
• Navient Corporation: Attorneys general have brought actions against Navient, the largest servicer of federal student loans, for engaging in deceptive student loan servicing practices. Other states, including Massachusetts, continue to investigate Navient.  

AG Healey has also secured more than $7 million in loan relief for students that went to Kaplan Career Institute, Lincoln Tech, Sullivan & Cogliano, Salter College, filed a lawsuit against ITT Tech, and reached a settlement with an unlicensed for-profit nursing school. The AG’s Office created a Student Loan Assistance Unit to help borrowers with their loans, explore repayment options, apply for income-driven repayment plans, get federal loans out of default, end wage garnishments and tax refund interceptions, resolve billing disputes, and apply for discharges. Borrowers can file a Student Loan Help Request at www.mass.gov/ago/studentloans. 

Today’s letter, led by New York Attorney General Eric Schneiderman and Colorado Attorney General Cynthia Coffman, was also signed by the attorneys general of California, Connecticut, Delaware, Hawaii, Illinois, Iowa, Kansas, Kentucky, Maine, Maryland, Minnesota, Mississippi, Montana, Nebraska, New Mexico, New Jersey, North Carolina, Oklahoma, Oregon, Pennsylvania, Rhode Island, Tennessee, Utah, Vermont, Virginia, Washington, and the District of Columbia, as well as the Executive Director of the Hawaii Office of Consumer Protection.

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