Attorney General Healey Applauds Education Regulations To Help Students Receive Loan Relief

In full transparency, the following is a press release from the Massachusetts Attorney General’s office. (stock photo)

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BOSTON — Massachusetts Attorney General Maura Healey co-led a coalition of 19 attorneys general in commending the U.S. Department of Education for its far-reaching proposed regulatory reforms and in urging the Department to adopt additional improvements to achieve equitable and transparent relief for student borrowers.

The coalition submitted public comments to Education Secretary Miguel Cardona, supporting the Department’s proposed changes to its Borrower Defense, Public Service Loan Forgiveness (PSLF), and Closed School Discharge regulations, while recommending additional changes to further benefit borrowers.

“The U.S. Department of Education has demonstrated a true commitment toward fixing our broken student loan system,” said Healey. “As states who have long advocated for borrower relief and fought against predatory practices, we are urging the Department to make accessing relief and loan forgiveness as easy and equitable as possible.”

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The Borrower Defense Rule was intended to hold abusive higher education institutions accountable for cheating students and taxpayers out of billions of dollars in federal loans and to provide loan relief for borrowers who were misled by their schools. Under the previous administration, the Department gutted the Borrower Defense Rule and replaced it with a wholly inadequate regulation that benefited predatory schools at the expense of victimized borrowers. In 2020, state attorneys general, co-led by Massachusetts and California, sued the Department over this unlawful regulation.

Today, August 15, the coalition commends the Department for undoing the harm caused to borrowers by proposing a more equitable and streamlined process. In particular, the coalition commends the Department’s decision to reinstitute provisions that limit schools’ use of binding predispute arbitration agreements and class action waivers, increase the Department’s ability to hold predatory schools financially accountable for the costs of their misconduct, and expand the basis for borrower relief. These proposed regulatory changes are essential to ensuring that students have access to critical relief and that students and taxpayers are no longer left holding the bag for predatory schools’ misconduct.

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To further improve the proposed regulations’ ability to fully protect borrowers and taxpayers, the coalition urges the Department to strengthen and clarify the presumption of full relief for borrowers with meritorious claims, to allow states and individuals to raise claims under state law and based on state attorney general actions in the first instance, and to ensure that borrowers with pending claims are protected from financial harm.

The letter also applauds the Department for undertaking rulemaking to create formal fixes to the problems that have plagued the administration of the PSLF program. The proposed regulations would expand the definition of qualifying payments and create a formal reconsideration process. The coalition urges the Department to further increase the scope of individuals who qualify for relief and to automate the PSLF process as much as possible, pointing to the pervasive loan servicer misconduct that imperiled loan relief for borrowers across the country.

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In February 2021, AG Healey announced a settlement with Pennsylvania Higher Education Assistance Agency (PHEAA), d/b/a FedLoan Servicing, that secured tens of thousands of individual loan account audits and associated loan account corrections, including credits for PSLF qualifying payments, for Massachusetts student loan borrowers whose federal loans were previously serviced by PHEAA. The settlement followed a lawsuit alleging that PHEAA made errors and provided misinformation to borrowers about PSLF eligibility requirements, causing borrowers to lose months of qualifying payments towards loan forgiveness. The Department’s proposed regulations would help prevent future servicers from causing the same harm to borrowers.

The letter also notes that the new proposed closed school discharge regulations make great strides towards providing efficient and effective relief for students whose school closes before they can complete their degree. To strengthen these regulations, the coalition urges the Department to clarify certain aspects of the Closed School Discharge regulation to better provide relief to borrowers enrolled at institutions at, or just before, their school’s closure.

“Under ED’s [the Education Department’s] proposed regulations, borrowers who have been victimized by their schools will be able to obtain critical relief, predatory schools will bear the consequences of their misconduct, and public servants will finally have a clearer path to loan forgiveness. We appreciate the care with which ED has undertaken this essential rulemaking process and look forward to working as partners to support and protect borrowers,” the letter states.

Joining AG Healey, California Attorney General Rob Bonta, and Illinois Attorney General Kwame Raoul in filing the comments are the attorneys general of Colorado, Connecticut, Delaware, the District of Columbia, Michigan, Minnesota, New Jersey, New Mexico, Nevada, New York, North Carolina, Oregon, Rhode Island, Vermont, Washington, and Wisconsin, as well as the State of Hawaii Office of Consumer Protection.

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