Betsy DeVos: This Memo Will Better Protect Student Loan Borrowers

If you’ve ever had a complaint about your student loans, this new memorandum may help you.The U.S. Department of Education and Consumer Financial Protection Bureau signed a Memorandum of Understanding - essentially a cooperation agreement - to address and better manage student loan complaints. The agreement calls for the Education Department and CFPB to meet quarterly and share complaint information, data, recommendations and analytical tools.

"All student loan borrowers, whether they have a Federally-held or private student loan, deserve world-class service and quick resolution when facing issues," DeVos said."Through this new agreement with the CFPB, we will coordinate our regulatory efforts, avoid needless duplication, and protect the borrowers we serve." The Education Departmentwill handle private student loans and issues with student loan servicers.

Complaints related to both federal and private student loans will be shared with both the CFPB and Education Department. Any complaints submitted through the incorrect website will be shared and referred. For example, if a private student loan complaint is submitted through the Education Department website, the Education Department will refer the complaint to the CFPB.

“It has been over two years since the [Education Department] terminated its Memorandum of Understanding with the CFPB, which is statutorily mandated in Dodd Frank,” said Persis Yu of the Student Loan Borrower Assistance Project. “While it is important to have an MOU in place once again, an MOU alone is not sufficient to protect borrowers. Predatory and abusive practices remain rampant.

Critics of this memorandum ask who will be responsible to go after student loan servicers on behalf of borrowers if there is any abuse or fraud. In November, Student Debt Crisis, a non-profit student loan advocate, sued the CFPB for, among other things, allegedly failing to supervise student loan servicers, and allegedly for “wrongly assert[ing] that [it] only has authority over [private student loans], which account for less than 20% of student loan debt.

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