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New guidelines make it easier for states to investigate loan servicers

Federal Student Aid office head Richard Cordray, shown here in 2013, issued new guidance Friday making it easier for state regulators to investigate student loan servicers. File photo by Ron Sachs/UPI
Federal Student Aid office head Richard Cordray, shown here in 2013, issued new guidance Friday making it easier for state regulators to investigate student loan servicers. File photo by Ron Sachs/UPI | License Photo

May 29 (UPI) -- The Department of Education announced Friday that it will make it easier for states to get information they need to oversee student loan servicing companies.

The department's new guidance supersedes a memo issued in 2017 directed loan servicing companies to send information requests from state attorneys general and other regulators to the Federal Student Aid office, which typically rejected them.

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FSA head Richard Cordray said the new guidance is intended to make it easier for state officials to get information from the FSA and from companies the Department of Education hires to collect student loans, CNN reported.

"To conduct these joint oversight and supervisory examinations effectively, our interagency partners need to have streamlined access to Department records and data where such access is permitted by applicable laws and policies," said Friday's memo from Cordray to the FSA's vendors.

When the 2017 memo was issued, then-Education Secretary Betsy DeVos argued that the federal government should be monitoring the system since the loans are federal assets.

The memo led to litigation from states and accusations that the department was obstructing investigations and hurting borrowers.

"This is a really big deal," Seth Frotman, executive director of the D.C.-based Student Borrower Protection Center told Yahoo Finance. "Under the DeVos administration, they used every trick and trap they could take to try and stop these efforts to bring accountability to the student loan industry."

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