As tuition has risen at the University and state funding for higher education has fallen, federal student loans have become increasingly important to many students’ ability to attend college. The system of federal student financial aid requires constant collaboration between the public and private sectors — and with the students receiving the aid. The many players in this process can often confuse consumers, unnecessarily complicating one of the most necessary elements of students’ college attendance. New policies imposed by U.S. Secretary of Education Betsy DeVos may further complicate that system — to the students’ detriment.
DeVos, in an internal notice, argued that the federal government’s right to regulate these loan companies supersedes that of states and is moving to place the student loan industry exclusively under the purview of the Trump administration. While this decision may offer consumers a seemingly clear picture of how their loans are being handled, the shift would actually expose them to a greater risk of exploitation by these loan companies. State governments have been on the front lines of keeping these companies in check and to strip them of this power would put the consumer at risk.
Student loan companies have proven their inability to function properly without government oversight. For example, Navient, a significant player in the student loan market, has come under fire for “illegally driving up loan repayment costs for millions of borrowers.” In addition, the National Collegiate Student Loan Trust demonstrated its incompetence by sloppily filling out loan paperwork for student borrowers, resulting in a wave of student loan forgiveness for those impacted. In the interest of preserving students’ financial protection, Congress has a responsibility to step in and clearly define states’ roles in oversight of student loan companies.
Pennsylvania Attorney General Josh Shapiro, along with the attorneys general of 24 other states, has argued that since their residents are the ones repaying the loans, the state governments should have the right to regulate the companies collecting those repayments. In Pennsylvania’s case, Shapiro argues that companies like Navient have been taking advantage of students by misrepresenting repayment processes. The attorneys general involved in various lawsuits against these student loan companies believe the courtroom is an effective way to reestablish their administrative dominance.
Student loans have proven increasingly difficult to repay for many Americans. According to the Consumer Financial Protection Bureau, students submitted 12,900 complaints during the 2016-17 year regarding federal student loans. In the five years CFPB has been fielding complaints, the organization has received over 50,000 dissatisfied responses. Mick Mulvaney, head of the CFPB, has argued the main reason behind the quantity of complaints and the $1.4 trillion in outstanding federal student loans is the strict oversight conducted during the Obama administration’s tenure. Ironically, DeVos’ proposal only centralizes the supervision of student loan companies.
The exact form of the federal government’s oversight is predictable — DeVos and other Education Department officials would likely loosen restrictions on student loan companies. The Trump administration’s trend towards deregulation lends credence to the arguments of Pennsylvania and other states. Since taking office, officials in the administration have eliminated initiatives such as the Clean Power Plan and Net Neutrality. While the administration has claimed these deregulatory practices are in place to increase efficiency and mitigate redundancy, applying this practice to the student loan industry would undermine the federal government’s responsibility towards consumer protection.
Transitioning control over student loan companies to the federal government stands in opposition to the traditional conservative push towards a decentralized governing system. DeVos’ move would contradict this staple principle, although the administration has not been particularly dogmatic when it comes to ideology — an entirely federally controlled student loan industry would only further the Trump administration’s pandering to corporate wealth, and its unfettered disregard of the individual American.
In light of these regulatory changes, the University must provide avenues for underprivileged students to attend. The plan to shift exclusive oversight of student loan companies to the federal government threatens the University’s ability to provide an accessible education to all students. While the effects of deregulated student loan companies may seem trivial in the short-term, the long-term effects of student loan debt can cripple an individual’s ability to survive in America. A deregulated student loan industry would offer companies greater opportunity to take advantage of consumers — the University must work with Congress to preserve state control over the industry in the name of student protection.