Betsy DeVos: It’s okay for servicers to mislead borrowers

What a mess.

Education Secretary Betsy DeVos has decided to roll back two Obama-era memos that were intended to guide servicers in their customer service efforts with borrowers. I discussed one the other week. Now that second shoe has dropped, peeling away the reasonable-sounding requests that basically servicers should be held accountable if “the company had misled or provided wrong information to borrowers or engaged in abusive consumer service” (remember, Navient is currently being sued for this).

Instead, DeVos said:

We must create a student loan servicing environment that provides the highest quality customer service and increases accountability and transparency for all borrowers, while also limiting the cost to taxpayers.

Of course, providing good customer service or making sure defaulting borrowers re-enter repayment shouldn’t need to cost any extra public dollars; it only does because the government would have to pay servicers more money in incentives to make up for the loss of their loan sharking business.

This furthers the tension between borrowers and servicers and cements the contention that servicers are actively working against borrower’s best interests. This has already been happening, but now it appears that it will no longer raise any of the red flags it was supposed to.

I’ve spoken with attendings who thought they would qualify for PSLF soon (but hadn’t filed for certification and been switched to FedLoan) call their servicers and get laughed off the phone, being told that they made too much money to have their loans forgiven. Most people reading this site know that’s not how the program works, and servicers like Navient don’t even handle PSLF. But of course, it’s in their best interest to lie and keep reaping payments.

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