Education Department spokeswoman Liz Hill said the agency is responsible for the oversight of federal student loans and devotes significant resources to that end.
“Federal loans are federal assets and therefore must be controlled and regulated by the federal government,” Hill said.
At issue is the trove of data on student loan accounts held by the private companies the Education Department pays to service its $1.4 trillion portfolio of education debt. Those loans servicers used to provide state and federal authorities records on repayment plans, correspondence with borrowers, internal memos and other information to aid investigations.
That changed around 2017, when state authorities say the Education Department stopped collaborating with their offices and began telling servicers to direct all questions to the department. But the federal agency would often stonewall state officials, creating a contentious relationship that continued to deteriorate. According to the letter, within the last year, the agency has routinely rejected state requests for student loan information, citing privacy concerns.
The attorneys general say the Education Department never formally provided a reason for no longer disclosing the data or consulted with the affected state and federal agencies. The attorneys general first raised the issue with the department in July, but say their concerns were ignored. Halting the flow of information to state authorities impedes law enforcement from “protecting the students the department exists to serve,” the letter said.
Prosecutors say the change in policy took shape as the Education Department tried to shield federal student loan servicers from state oversight.
A year ago, the Trump administration issued guidance telling state regulators to back off those student loan servicing companies, arguing that only the federal government has the authority to oversee its contractors.
State authorities say they must ramp up supervision of student loan servicers because the federal government has abdicated its responsibility. But the added scrutiny has created consternation among servicers, who lobbied DeVos to prevent states from imposing additional rules and regulations.
“Congress also gave to the department the authority to contract with and supervise its student loan servicers and made them responsible to the department,” Hill said. “A piecemeal, state-by-state approach to regulating federal assets causes confusion for borrowers, makes administration of the loan program more complicated and costly, and thwarts Congress’ goals that the program be administered at the federal level."
The Education Department’s inspector general issued a scathing audit in February that state authorities have raised as proof that the department is incapable of solely regulating its vendors. The audit said the department has failed to keep watch over its servicers and allowed them to operate without being held accountable for not complying with their contracts.
“At a time when the Department struggles to keep up with its oversight of loan servicers charged with handling millions of student loan accounts, protecting student loan borrowers from unfair or deceptive practices is more important than ever,” the attorneys wrote. “Now is the time to bolster, not curtail, our joint oversight and enforcement efforts.”
Maryland Attorney General Brian E. Frosh (D), who signed the letter, said the Education Department has no legitimate reason for withholding student loan records.
“The private companies contracted by the Department to service student loans are subject to state consumer protection laws,” Frosh said in a statement Friday. “The established practice of sharing certain student loan information helps states ensure these companies are complying with the law and borrowers are being treated fairly.”