Ditching Watchdog, Betsy DeVos Signals 'Open Season to Defraud' Student Borrowers

Calling the move "outrageous and deeply troubling," consumer advocates and opponents of skyrocketing student debt spoke out Tuesday against the Trump administration's decision to end the working relationship between the Department of Education and the government watchdog tasked with helping oversee the federal student loan program and protect borrowers.

At the direction of Congress, under the Dodd-Frank financial reform act, the Department of Education has shared information with the Consumer Financial Protection Bureau (CFPB) since 2011 in order to provide assistance to borrowers with complaints about Federal student loans. But the Department, now run by Secretary Betsy DeVos, informed the Bureau in a letter last week that it was ending the relationship.

Especially at a time when federal student loan debt has reached over $1.3 trillion, critics condemned the decision.

The National Consumer Law Center (NCLC) says, "the CFPB has stood up for students and demonstrated the urgent need for an independent watch dog over student loan servicers and collectors," fighting "to ensure that struggling borrowers can access the repayment programs they are entitled to."

The Education Department accused the CFPB of "overreaching" by "unilaterally expanding its oversight role to include the Department's contracted federal loan servicers." Republican lawmakers have opposed the CFPB's involvement in monitoring student loan complaints, and the Trump administration has sought to weaken the Bureau.

In its statement, the NCLC said the accusation of an overreach by the Bureau is unfounded:

Congress gave the CFPB authority over those servicers and collectors and directed the CFPB to establish the agreement that Education has terminated 'to ensure coordination in providing assistance to and serving borrowers seeking to resolve complaints related to their private education or Federal student loans.'

Clare McCann, who worked in the Education Department under President Barack Obama and now directs federal higher education policy at New America, also condemned the decision.

"This is just another example of how collaborative, interagency work has fallen apart under the new administration, and it's bad news for borrowers," said McCann. "Ending its formal relationship with the CFPB is proof that the department is working to systematically dismantle those planned protections for borrowers."

The DOE's letter to the Bureau came days after the appointment of a former executive at the for-profit DeVry University to run the Department's unit combatting school fraud. Last year, DeVry paid $100 million in a settlement after it was accused of misleading students.

Sen. Elizabeth Warren (D-Mass.)--the leading figure in establishing the CFPB and a longtime critic of for-profit colleges and the federal student loan system--expressed shock at the DeVry official's appointment and DeVos's agenda.