The Department of Education announced that it will no longer work with the Consumer Financial Protection Bureau (CFPB) when it comes to combating student loan fraud.
The latest announcement comes on the heels of other moves by the Department of Education, headed by Secretary of Education Betsy DeVos, to undo Obama-era policies.
Why is the Department of Education cutting ties with the CFPB?
In 2011 and 2014, the Department of Education entered into two Memorandums of Understanding with the CFPB. These were designed to allow for cooperation in gathering information about loan servicing complaints and enforcing actions against servicers for some of their practices.
A letter sent to CFPB Director Richard Cordray accused the bureau of overstepping boundaries in pursuing cases of student loan fraud. The letter was signed by Kathleen Smith, the acting assistant secretary of the Office of Postsecondary Education, and A. Wayne Johnson, the new COO of the Federal Student Aid office.
The Department of Education claimed CFPB complaints related to Title IV federal student loans should be directed to the Department within 10 days of receipt. Instead, the letter claims, the CFPB was taking matters into its own hands.
“The CFPB’s intervention in this area adds confusion to borrowers and servicers who now hear conflicting guidance related to the Title IV student loan services for which the Department is responsible,” read the letter.
What is the CFPB response?
“We are surprised and disappointed to learn the Education Department is planning to terminate our Memoranda of Understanding, which established the foundation for some very successful collaborations,” said David Mayorga, a CFPB spokesperson, in a statement sent to Student Loan Hero.
“We have not previously heard any concerns as we have worked together to make sure that all student loan borrowers are treated fairly, with respect and dignity,” he added.
In the past, the CFPB has gone after student loan servicers for practices that they feel are harmful to borrowers. Additionally, the CFPB has shed light on practices by servicers that keep high-risk borrowers from enrolling in affordable repayment plans.
By ending information-sharing with the CFPB, the Department of Education could head off efforts by the CFPB to enforce actions on student loan servicers that aren’t acting in the best interests of borrowers.
“The Consumer Bureau has statutory responsibilities to protect student loan borrowers — like all consumers — from practices that violate the laws we enforce and we would like to continue to work with the Education Department toward our shared goals,” Mayorga said.
Will this move help student loan borrowers?
The Department of Education claimed ending cooperation with the CFPB will aid in protecting borrowers. Further, in an Aug. 31 statement announcing new hires, DeVos claimed that protecting students is a top priority.
However, since the Department of Education began rolling back policies from the Obama administration, there has been an uptick in complaints against student loan servicers. But ending cooperation with the CFPB is part of the Department of Education’s plan to protect borrowers, and some agree with the move.
Representative Virginia Foxx (R-N.C.) agreed with the move to stop cooperation, according to Inside Higher Ed. Foxx insisted that the partnership with the CFPB was doing more harm than good:
“[I]t was a mistake for the Obama administration to have the Department of Education let the CFPB abuse its privilege on these matters,” she said in a statement.
Meanwhile, consumer advocates decried the decision to cut the CFPB out of complaints related to student loan fraud.
The National Consumer Law Center (NCLC) said the 2011 memorandum was ordered to help the Department of Education, which was failing at its mandate to adequately protect consumers.
The memorandum was designed “to collaborate to ensure coordination in providing assistance to and serving borrowers seeking to resolve complaints related to their private education or federal student loans.”
An NCLC statement said, “The claim that the CFPB ‘unilaterally’ expanded its oversight role over servicers and collectors of federal student loans is unfounded … DeVos is prioritizing the interests of predatory for-profit schools, debt collectors, and trouble student loan services over the interests of student loan borrowers.”
The NCLC also pointed to the hiring of industry insiders for top positions in the administration.
A. Wayne Johnson, head of the Financial Student Aid office, is a former student loan CEO. Julian Schmoke, whom will lead the student aid enforcement unit, worked as an administrator for a university fined for fraudulent practices.
Student loan borrowers must learn their rights
The CFPB is increasingly isolated and is, according to Inside Higher Ed, one of the few federal agencies to step up enforcement under the Trump administration.
If the government is stepping away from consumer protection, it’s vital for student loan borrowers to understand their rights and educate themselves on their options.
Here are some resources that can help you understand your rights:
- Battling Your Servicer? How a Student Loan Ombudsman Can Help
- The Complete Guide to Income-Driven Repayment Plans for Federal Student Loans
- 4 Ways the New Student Aid Bill of Rights Will Impact Your Loans
- 3 Important Things Your Student Loan Exit Counselor Didn’t Tell You
Interested in refinancing student loans?Here are the top 6 lenders of 2018!
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1 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 6.97% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 6.30% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of Month/Day/Year, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 08/21/18. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at firstname.lastname@example.org, or call 888-601-2801 for more information on ourstudent loan refinance product.
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2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
APR stands for “Annual Percentage Rate.” Rates listed include a 0.25% EFT discount, for automatic payments made from a checking or savings account. Interest rates as of 11/8/2018. Rates subject to change.
Variable rate options consist of a range from 3.27% per year to 6.09% per year for a 5-year term, 4.64% per year to 6.14% per year for a 7-year term, 4.69% per year to 6.19% per year for a 10-year term, 4.94% per year to 6.44% per year for a 15-year term, or 5.19% per year to 6.69% per year for a 20-year term, with no origination fees. APR is subject to increase after consummation. The variable interest rate will change on the first day of every month (“Change Date”) if the Current Index changes. The variable interest rates are based on a Current Index, which is the 1-month London Interbank Offered Rate (LIBOR) (currency in US dollars), as published on The Wall Street Journal’s website. The variable interest rates and Annual Percentage Rate (APR) will increase or decrease when the 1-month LIBOR index changes. The variable interest rates are calculated by adding a margin ranging from 0.98% to 3.80% for the 5-year term loan, 2.35% to 3.85% for the 7-year term loan, 2.40% to 3.90% for the 10-year term loan, 2.65% to 4.15% for the 15-year term loan, and 2.90% to 4.40% for the 20-year term loan, respectively, to the 1-month LIBOR index published on the 25th day of each month immediately preceding each “Change Date,” as defined above, rounded to two decimal places, with no origination fees. If the 25th day of the month is not a business day or is a US federal holiday, the reference date will be the most recent date preceding the 25th day of the month that is a business day. The monthly payment for a sample $10,000 loan at a range of 3.27% per year to 6.09% per year for a 5-year term would be from $180.89 to $193.75. The monthly payment for a sample $10,000 loan at a range of 4.64% per year to 6.14% per year for a 7-year term would be from $139.65 to $146.76. The monthly payment for a sample $10,000 loan at a range of 4.69% per year to 6.19% per year for a 10-year term would be from $104.56 to $111.98. The monthly payment for a sample $10,000 loan at a range of 4.94% per year to 6.44% per year for a 15-year term would be from $78.77 to $86.78. The monthly payment for a sample $10,000 loan at a range of 5.19% per year to 6.69% per year for a 20-year term would be from $67.05 to $75.68.
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
3 Important Disclosures for SoFi.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown.
All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 2.28% effective October 10, 2018.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.47% – 6.99%3||Undergrad & Graduate|
|2.47% – 6.30%1||Undergrad & Graduate|
|2.51% – 8.09%4||Undergrad & Graduate|
|3.02% – 6.44%2||Undergrad & Graduate|
|2.69% – 7.21%5||Undergrad & Graduate|
|2.79% – 8.39%6||Undergrad & Graduate|