“We are alarmed to see the department jeopardize the success of this law,” said Elizabeth Falcon, executive director of DC Jobs With Justice, which represents student activists, labor organizations and community groups. “By requiring applicants to meet the qualifications of both positions, the department has undermined its own candidate pool and delayed relief to the tens of thousands of student loan borrowers in D.C.”
The Department of Insurance, Securities and Banking issued a statement to The Washington Post that defended the decision to add “foreclosure mitigation activities” to the ombudsman’s job description. Department officials argue that the addition “has not impacted recruitment for the position,” nor will it “impede the ability of the ombudsman to direct the regulation of student loan services or provide critical educational information” to residents.
“This was a natural pairing of functions as mortgage servicing and default involve issues like those in the student loan servicing space,” the statement said. “The department is confident that it will be ready and will dedicate all resources necessary to protect our residents with student loans. ”
Applications for the ombudsman position will be reviewed this week, with interviews slated to begin next week, according to the department.
The District joins such states as California and Connecticut in helping residents manage student loans and holding the companies responsible for collecting payments accountable. Under the D.C. law, loan servicers must obtain a license to operate, which the ombudsman could revoke, deny or suspend. That point person will have the right to investigate servicers and refer cases to the city’s attorney general.
D.C. Council member David Grosso (I-At Large) said he worries that the dual demands of the ombudsman position could undermine the objectives of the legislation that he championed. He wrote the department on Monday asking for a more detailed explanation of its decision, the number of candidates for the job and whether there would be any budget effect if the foreclosure component is removed.
“Now more than ever, a dedicated student loan ombudsman is necessary to ensure that our residents will be able to lodge complaints and receive vital educational information as it relates to their student loans,” Grosso said.
The councilman points to recent developments at the federal level as evidence of the need for local oversight of student loan servicing companies. Earlier this month, Education Secretary Betsy DeVos withdrew memos issued by the Obama administration to increase consumer protections in student loan servicing. The move followed the Trump administration’s decision to revoke federal guidance that barred student debt collectors from charging high fees on past-due loans.
“With Donald Trump and Betsy DeVos abandoning student loan borrowers, now is not the time to cut corners with our support for residents,” said Falcon of DC Jobs With Justice. “We call on the mayor and the D.C. Council to get a student loan ombudsman hired and working, as the law intended, so that D.C. can protect and support its student loan borrowers who have been abandoned by the federal government and their servicers.”
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