THECOMMONWEALTH OF MASSACHUSETTS

OFFICEOF THEATTORNEY GENERAL

ONEASHBURTON PLACE
BOSTON,MASSACHUSETTS 02108

MAURAHEALEY TEL:(617)7272200
www.mass.gov/ago
ATTORNEYGENERAL

April24,2017

TheHonorableBetsyDeVos
UnitedStatesDepartmentofEducation
400MarylandAvenue,SW
Washington,D.C.20202

Re: Revocation of Student Loan Borrower Protections

DearSecretaryDeVos,

We,theundersignedAttorneysGeneralofMassachusetts,Illinois,California,Connecticut,
Hawaii,Iowa,Kentucky,Maine,Maryland,Minnesota,Mississippi,NewMexico,NewYork,
NorthCarolina,Oregon,Pennsylvania,RhodeIsland,Vermont,Virginia,Washington,andthe
DistrictofColumbia,aswellastheExecutiveDirectoroftheOfficeofConsumerProtectionof
Hawaii,writetoexpressourprofoundconcernregardingtheDepartmentofEducation's
revocationofcriticalstudentloanservicingreforms.Thememorandawithdrawnbythe
DepartmentonApril11,2017providedguidancedesignedtoreform thestudentloanservicing
industryinordertoprotectstudentloanborrowersand helptheseborrowersfindaffordableways
torepaytheirdebtsandavoiddefault.1 Atatimewhentheneedforcommonsensefederal
studentloanservicingreformsisundeniable,theDepartment'sdecisiontoroll backessential
protectionsimperilsmillionsofstudentloanborrowersandfamilies.

Investigationsandenforcementactionsundertakenbythestateattorneysgeneralhaverepeatedly
revealedthehavocthatstudentloanservicers'poorpracticesandservicingfailureswreakonthe
livesofborrowers.In2016,theMassachusettsAttorneyGeneralentered anassuranceof
discontinuancewithACSEducationServices,anationalstudentloanservicer,overallegations
thatitfailedtoproperlyprocessstrugglingborrowers'applicationsforincomedrivenrepayment
plans,amongotherviolationsofstateandfederallaw.2 InJanuaryof2017,theIllinoisand
WashingtonAttorneysGeneral,alongwiththeConsumerFinancialProtectionBureau("CFPB")

1 ConsiderationofPastPerformancein StudentLoanServicingRecompete,Dep'tofEd.(June30,2016),available

athttps://sites.ed.gov/ous/files/2016/06/JohnKingservicerpastperformanceniemo.pdf;Policy Directionon
FederalStudentLoanServicing,Dep'tofEd.(July20,2016),availableathttps://www2.ed.gov/documents/press
releases/loanservicingpolicymemo.pdf;AddendumtoJuly20,2016Memorandumon PolicyDirectiononFederal
StudentLoanServicing,Dep't ofEd.(Oct.17,2016),availableathttps://www2.ed.gov/documents/press
releases/loanservicingpolicymemo.pdf.
2 AGHealeySecures$2.4Million,SignificantPolicyReformsin MajorSettlementwithStudent LoanServicer,

Nov.22,2016,availableathttp://www.mass.gov/ago/newsandupdates/pressreleases/2016/aghealeysecures24
millionstudentloanservicer.html.
filedsuitagainstNavient,oneofthelargestservicersoffederalstudentloans,forwidespread
abusesofstudentborrowersacrossallaspectsofitsbusiness,includingstudentloanorigination,
loanservicing,anddebtcollection.3

TheselawsuitsallegedthatstrugglingborrowersnationwidecomplainedthatNavient
consistentlyfailedtoassistthem.Whenborrowersstrugglingtopaytheirfederalstudentloans
calledNavientforhelp,thecompanysteeredthemintoexcessiveforbearancesthatincreasedthe
overallcostoftheirloansinsteadoftellingborrowersaboutfederalincomebasedrepayment
plans.

Ourofficesregularlyhearfromborrowerswhodidnotreceivethenecessaryguidancefromtheir
loanservicerstomakesounddecisionsaboutrepaymentandconsequentlyfaceballooningloan
balances,escalatingmonthlypayments,creditscoreruin,defaults,andlargecollectionfees.

TheguidancerevokedbytheDepartmentwasdesignedtoimprovetheaccuracyofinformation
providedtoborrowersbyservicers,ensurethatborrowersaretreatedconsistently,andincrease
serviceraccountabilityinordertocorrectpersistentfailures.Especiallyconcerningisthe
withdrawalofguidanceintendedtoensurethatservicers'pastperformancewillbethemost
importantnoncostfactorconsideredbytheDepartmentinawardingfutureservicingcontracts.
Critically,therescindedreformsaimtoimproveaccesstoincomedrivenrepaymentplans
designedtohelpborrowersindistressavoiddefault.Thiseffortcouldnotbemoreimportant.
Facingamountingstudentdebtcrisis,borrowersstraggleundertheweightoftheirstudentloan
debtandfederalstudentloandefaultratescontinuetorise.In2015,theCFPBestimatedthat
morethan25percentofstudentloanborrowersweredelinquentorindefaultonastudentloan.4
Manysuchborrowerswouldbenefitgreatlyfromenteringincomedrivenrepaymentplansbut
arepreventedfromdoingsobystudentloanservicermisconductandmisinformation.Inits2015
report,theCFPBidentifiedtroublingstudentloanservicerpracticesincludingpaperwork
processingerrorsandfailuretoprovideaccurateinformationthatdiscouragetheuseof
incomedrivenrepaymentplans.5 Byreformingservicerincentivesandstrengtheningconsumer
protections,therescindedguidancesoughttoeliminatetheloanservicingfailuresthatkeep
borrowersfromenteringaffordablerepaymentplans.

ThestatedrationaleprovidedbytheDepartmentforitswithdrawaloftheseservicingreformsis
to"negateanyimpediment,ambiguityorinconsistency"intheapproachtothestudentloan
servicingprocurementprocess.6ButtheeffectoftheDepartment'sactionistoleavestudentloan
boiTowersmiredinambiguityandinconsistencythattheservicingreformswereintendedto
prevent.AmongthemanyreformstheDepartmenthasseenfittorevokearethecommonsense
requirements(i)thatservicersapplyborroweroverpaymentstoloansbearingthehighestinterest
ratesunlesstheborrowerinstructsotherwise,and(ii)thatservicersinformborrowersofincome

3AttorneyGeneral MadiganSuesNavientandSallieMaefor RampantStudentLoanAbuses,Jan.18,2017,

availableathttp://www.illinoisattomeygeneral.gov/pressroom/2017_01/20170118.html.
4ConsumerFinancialProtectionBureau,Student Loan Servicing, Analysis of Public Input and Recommendations

for Reform, Sept.2015,availableathttp;//files.consumerfmance.gov/iy201509_cfpb_studentloanservicmg

report.pdf.
5 Id.
6StudentLoan ServicerRecompete,Dep'tofEd.(April11,2017),availableat

https://www2.ed.gov/documents/pressreleases/studentloanservicerrecompete.pdf.

2
drivenrepaymentoptionsbeforeplacingborrowersinforbearanceordeferment.Theseservicing
standardswouldhelpborrowersmanagetheirloans,savemoney,andmakeinformeddecisions
abouttheirrepaymentoptions.TheDepartment'sstatedrationaledoesnotjustifysummarily
denyingstudentborrowerssuchbasicprotections.7

Throughitschoiceofstudentloanservicersanditscreationofservicingstandards,the
Departmentplaysacentralroleindeterminingwhetherornotborrowerswillbeableto
successfullyrepaytheirfederalstudentloandebt.TheguidancerevokedbytheDepartmentwas
expresslydesignedtoprotectborrowersand correctpervasivestudentloanservicingfailuresthat
harmstudentloanborrowersandtheirfamilies.Byrevokingthesecriticalprotections,the
Departmenthasabdicateditsresponsibilitytostudentloanborrowers.

Weurgeyoutoreconsiderimmediately.

Sincerely,

Maura LisaMadigan
MassacKuscUsAttorneyGeneral IllinoisAttorneyGeneral

EricT.Schneiderman BrianE.Frosh
NewYorkAttorneyGeneral MarylandAttorneyGeneral

LoriSwanson BobFerguson
MinnesotaAttorneyGeneral WashingtonStateAttorneyGeneral

AndyMeshear TomMiller
KentuckyAttorneyGeneral IowaAttorneyGeneral

7Servicers' failuretocomplywithsuchstandardsmaybeindependentviolationsofstatelaw.

3
KarlA.Racine XavierBecer
DistrictofColumbiaAttorneyGeneral ^CaliforniaAttorneyGeneral

StephenH.Levins DouglasS.Chin
ExecutiveDirector, HawaiiAttorneyGeneral
HawaiiOfficeofConsumerProtection

JanetT.Mills KoshStein
MaineAttorneyGeneral NorthCarolinaAttorneyGeneral

lEllenF.Rosenblum
Hood
ssissippiAttorneyGeneral OregonAttorneyGeneral

GeorgeJepsen MarkR.Hening
ConnecticutAttorneyGeneral VirginiaAttorneyGeneral 0

JoshShapiro HectorBalderas
PennsylvaniaAttorneyGeneral NewMexicoAttorneyGeneral

Thomas|J.IDohovanJr. PeterF.Kilmartin
VermontAtWrneyGeneral RhodeIslandAttorneyGeneral