Trump Administration Blocked Investigation Into Student Loan Forgiveness Program

Photo: Drew Angerer (Getty Images)

As student loan debt grew into a $1.5 trillion crisis, Trump administration officials coordinated a deliberate effort to obstruct a watchdog agency from investigating abuse by student loan servicers, circumventing a law that offered debt forgiveness to college graduates.

In 2007, Congress created the Public Service Loan Forgiveness Program, a plan with a simple idea: College graduates who worked in qualifying public service jobs could make 120 income-based student loan payments and have their federal student loan debt forgiven. Teachers, firefighters, military members, nonprofit workers, and other public sector employees now had the opportunity to erase their debt in as little as ten years.

Advertisement

Although the plan seemed straightforward, a whopping 99 percent of people who applied for the program were rejected. Many of those applicants reported that private loan servicers had tried to steer them into other repayment options and sometimes committed outright fraud, leading to multiple lawsuits against Betsy DeVos’ Department of Education. The complaints accused private servicers like Navient and Nelnet, of miscounting payments, providing erroneous information and failing to inform borrowers of their right to appeal mistakes.

To fix the problem, the Consumer Financial Protection Bureau, an independent watchdog agency, sent investigators to loan servicers to look into their practices. The CFPB “was designed to be an apolitical and independent oversight agency, fulfilling its mission to protect consumers and borrowers regardless of the prevailing political winds of either the White House or Congress,” Forbes reports.

But when the agency’s inspectors went to observe the loan servicing agencies, the Department of Education thwarted the investigations by instructing the companies not to comply with federal law enforcement officials. Christopher Peterson, a former attorney for the CFPB called the obstruction efforts “nonsense,” explaining that private corporations shouldn’t have the option of ignoring federal regulators.

NPR reports:

Several sources familiar with the matter tell NPR that the bureau sent teams of examiners into servicing companies that run student loan call centers. Such examinations typically go on for two months, with the team embedded at the company. There are months of follow-up after that.

But the Trump administration’s Education Department told loan servicing companies not to share information with the bureau about the vast majority of student loan borrowers, citing privacy concerns.

That’s even though the companies are allowed to turn over private financial information to credit reporting companies. But the Education Department told the companies it was not OK to share information with a law enforcement agency. The CFPB is charged with enforcing consumer protection laws.

“That seems like nonsense to me,” Peterson says, referring to the privacy issue. “It’s the United States government.”

Sources tell NPR that the move scuttled the CFPB’s efforts to help. The examiners couldn’t get most of the information the bureau wanted, so it couldn’t identify problems and help fix them.

Advertisement

After the matter was left unresolved, Trump’s next step was to appoint Kathy Kraninger as director of the CFPB, a mid-level bureaucrat with no experience dealing with consumers, finance or any kind of protection. After Kraninger’s appointment, the agency simply stopped trying to investigate student loan servicers. The Department of Education says that the CFPB should come and talk to them if they want to investigate student loan servicers, even though the DOE doesn’t service student loans.

But why would Betsy DeVos and the Trump administration do this? It’s not like Ukraine has a student loan servicing company or Vladimir Putin has a tape of Sallie Mae peeing on the Donald.

Advertisement

Well, student loan servicers are essentially arms of large financial institutions, an industry that typically favors Republicans who support less regulation and oversight. Others say loan forgiveness is a form of welfare.

Or maybe, because black people might benefit.

Black people make up a disproportionate amount of public-sector workers, the U.S. military and people who hang up on student loan collectors. Collectively, Americans owe 1.5 trillion dollars in student loans and the debt is disproportionately owed by black students. According to the National Center for Education Statistics, 12 years after finishing college, the average black graduate owes 113 percent of their original student loan debt.

Advertisement

When asked for comment, DeVos cackled, wiped the baby blood from her mouth, mounted her hovering broom and flew into the moonlit night.

Share This Story

About the author

Michael Harriot

World-renowned wypipologist. Getter and doer of "it." Never reneged, never will. Last real negus alive.