Education Secretary Betsy DeVos on Tuesday rolled back an Obama administration attempt to reform how student loan servicers collect debt. The former president’s administration issued a pair of memorandums last year requiring that the government’s Federal Student Aid office, which services $1.1 trillion in government-owned student loans, do more to help borrowers manage, or even discharge, their debt.
But in a memorandum to the department’s student aid office, DeVos formally withdrew the two Obama memos. The Obama administration’s approach, DeVos said, was inconsistent and full of shortcomings. She didn’t detail how the moves fell short, and her spokesmen, Jim Bradshaw and Matthew Frendewey, didn’t immediately respond to a request for comment.
A recent epidemic of student loan defaults and what authorities describe as systematic mistreatment of borrowers prompted the Obama administration, in its waning days, to force the FSA office to emphasize how debtors are treated rather than maximize the amount of cash they can stump up to meet their obligations.
Obama’s team also sought to reduce the possibility that new contracts would be given to companies that mislead or otherwise harm debtors. The current round of contracts end in 2019, and among three finalists for a new contract is Navient Corp. In January, state attorneys general in Illinois and Washington, along with the federal Consumer Financial Protection Bureau, sued Navient over allegations the company abused borrowers by taking shortcuts to boost its own bottom line. Navient has denied the allegations.
