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Thursday, 13 April 2017 05:51

Betsy DeVos Makes Student Loan Debtors More Vulnerable to Predatory Collectors

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betsydevoss333Secretary of Education Betsy DeVos (Photo: Gage Skidomore)

In a sweeping move this week, Education Secretary Betsy DeVos put student loan debtors at greater risk of high-pressure collection tactics for government-backed loans, according to Bloomberg:

Obama issued a pair (PDF) of memorandums (PDF) last year requiring that the government’s Federal Student Aid office, which services $1.1 trillion in government-owned student loans, do more to help borrowers manage, or even discharge, their debt. But in a memorandum (PDF) to the department’s student aid office, DeVos formally withdrew the Obama memos.

According to the report in Bloomberg, the Obama administration had taken action through the Department of Education to protect student borrowers from predatory loan collectors:

A recent epidemic of student loan defaults and what authorities describe as systematic mistreatment of borrowers prompted the Obama administration, in its waning days, to force the FSA office to emphasize how debtors are treated, rather than maximize the amount of cash they can stump up to meet their obligations.

Obama’s team also sought to reduce the possibility that new contracts would be given to companies that mislead or otherwise harm debtors. The current round of contracts will terminate in 2019, and among three finalists for a new contract is Navient Corp. In January, state attorneys general in Illinois and Washington, along with the U.S. Consumer Financial Protection Bureau, or CFPB, sued Navient over allegations the company abused borrowers by taking shortcuts to boost its own bottom line. Navient has denied the allegations.

Bloomberg notes the reaction to the move by the Illinois attorney general: "In a statement Tuesday, Illinois Attorney General Lisa Madigan, who is suing Navient [a large student loan debt collector for the federal government], agreed: 'The Department of Education has decided it does not need to protect student loan borrowers.'"

DeVos claims that she rescinded the Department of Education guidelines to save taxpayers money. She alleges that requiring student loan debtors to be handled with a more compassionate approach is too expensive. As Fortune reports,

DeVos said in a press memo that she was rescinding the previous administration's list of demands to "demonstrate sound fiscal stewardship of public dollar" and limit the cost to taxpayers. The move came after a letter from industry lobbying National Council of Higher Education Resources asking Congress to alter or delay the Education Department's changes.

Then-President Obama issued the guidance after a wave of student loan defaults and allegations that lenders were providing false information, charging unexpected fees and cheating borrowers out of repayment rights.

The guidelines also aimed to reduce awarding contracts to firms who mistreated or misled borrowers.

However, DeVos doesn't appear concerned about spending public funds when it comes to her own personal security.

CNN reported this month about DeVos's special protection costs:

An unusual security arrangement for Education Secretary Betsy DeVos is costing taxpayers upwards of $1 million per month.

Citing a determination that "a threat to the secretary's safety exists," the US Marshals Service said it would continue providing her a security detail, though it would not detail the nature of the threat.

The agreement has the Education Department reimbursing the marshals $7.78 million this fiscal year [which annualizes out to about $12 million], which works out to nearly $34,000 per day.

A Washington Post report notes that DeVos is the only cabinet secretary being protected by the marshals. The Post details the cost of these heightened security measures:

The Marshals Service is hiring nearly two dozen people to guard her, according to a person briefed on the arrangements, who was not authorized to speak publicly. The jobs include 20 positions at the GS-13 level ($95,000-$123,000 annual salary, depending on experience), and 2 positions at the GS-14 level ($112,000 to $146,000 annual salary).

While DeVos is getting enhanced personal protection, allegedly due to protesters against her policies and unspecified threats, she is giving student loan borrowers the shaft.