The Biden administration announced Friday it is reversing a Trump-era policy and will broaden the ability for state and federal regulators to investigate large student loan companies.
Richard Cordray, the Biden administration’s federal student aid chief, announced the new policy, stating that he plans on work with state attorneys general and other officials to monitor and obtain information from student loan companies and debt collectors that are hired by the Education Department.
The move essentially rescinds a policy implemented under former Education Secretary Betsy DeVos that pressed loan companies affiliated with the department to avoid responding to requests for information from outside parties, including state attorneys general.
“Instead of finding reasons to deny these requests, we should be spending our time partnering with state agencies to effectively oversee our loan servicers and debt collectors. Effective today, we’re getting rid of the Bradfield Memo and replacing it with a new memo setting out a different approach. Now, when we receive these requests, our staff will be ready to work with our state partners to review them quickly and approve them whenever it is possible to do so,” Cordray announced.
A memo Cordray released outlines the new policy and calls for a “streamlined and expedited process” for officials to request information as part of investigations into student loan companies.
“States and regulators need information when they think a loan servicing company might be violating a law or regulation,” Cordray said. “To know for sure, they need to look at the companies’ policies and procedures, their handbooks, complaints made by customers, and anything else that shows how the company operates.”
Cordray’s announcement comes as student loan services face a slew of lawsuits over allegations that they broke state consumer protection laws.
Most recently, Colorado Attorney General Phil Weiser (D) sued Pennsylvania Higher Education Assistance Agency in an effort to deliver records to regulators seeking to study the company’s handling of federal student loans since the start of the coronavirus pandemic.