The Industry of Student Loans Is Clashing With 25 States
The industry of student loans in the United States is vast and has disbursed nearly $1 trillion to students. It has become practically impossible for students to obtain a quality education from private schools and colleges without assistance from the industry of student loans.
Quite a few people may consider student loans as a blessing in disguise. Especially for people who are unable to afford the high cost of education. However, it must also be noted that student loans are leaving individuals indebted and in some cases even for life. Students who graduate are required to delay important events in life simply because they cannot afford to take on additional expenditure. Now, the industry of student loans is clashing with 25 states by trying to derail investigations into the allegedly abusive practices adopted for the recovery by asking the Department of Education to issue a formal guidance preempting state probes according to a group of 25 attorneys general.
What Do The States Have To Say About this Clash
On Tuesday, some states, including Texas, Kansas, California and New York, sent a letter to the education secretary Betsy DeVos asking her to dismiss the requests by a couple of national industry groups arguing that the probes conducted by them had been effective in returning millions of dollars to the borrowers.
The states have further pointed out that the requests by the industry groups are defying the defined responsibilities of the states to protect their residents from abusive practices which are also fraudulent. The states are holding the view that the department cannot sweep away the laws of the state that are applying to student loan service providers and debt collectors.
The dispute may bring to the forefront the strategy of the Trump administration which considers the vast ecosystem which is feeding on federal student loans and includes among them debt services, debt collection agencies and refinance lenders. The opportunities for abuse are rising significantly as the debt continues to balloon.
According to data presently available, 7 million former students had defaulted on $144 billion in federal loans as of June 30, 2017. The corresponding figure of defaulting borrowers was 1.1 million for loans which were directly disbursed by the education department.
The states have been successful in recent times when they investigated wrongdoing in higher education and also managed to win loan forgiveness to the tune of $103 million which was a part of a settlement ordered by the justice department with the Education Management Corp. because the school had allegedly made misleading statements to students.
The states seem firm to challenge the industry of student loans by stating that if the industry was not checked in time it would be potentially contradictory to the existing regulations and policies of the federal government.
Are the States Adopting The Right Policy Towards The Industry Of Student Loans?
Regardless of whether the cost of education is affordable or not, it is well known that the student loans industry is violating the state consumer protection laws in most cases by steering borrowers to obtain short-term plans that are postponing their required payments rather than assisting them to enroll in plans which Sets a limit on their payments according to their income. Debt collection agencies are also using abusive practices when trying to recover the money owed by the student.
The clash with the student loans industry has been initiated by the states that are looking forward to protecting their inhabitants. The Atty. Gen. from Illinois, Washington and Pennsylvania have initiated legal action against Navient Corp. which is the largest student loan company in the country. The allegations against them are for violating the consumer protection laws of the state and pursuing forbearance plans because of the less time it took for its representatives from the customer service department to save money for themselves.
The student loan crisis in America has assumed alarming proportions and is presently exceeding $1.3 trillion. The American administration cannot allow the industry of student loans to browbeat students into accepting unfair terms and conditions which are contravening the federal laws which are in place. It may be too late for the actions that are being taken by the state but students can rest assured that the states have begun looking at the problem and are willing to act to check the industry of student loans from taking undue advantage of the financial condition which is normally faced by students.
Should The States Have an Earlier Against The Student Loans Industry? What’s Your Take On This Subject?
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