Proclaiming that he “won’t allow a generation of New Yorkers to get victimized by the very system that was created to help them get ahead, “ New York State Attorney General Eric Schneiderman today announced an aggressive crackdown on fraud and abuse in the student loan industry.
The announcement follows a proposed settlement that the Consumer Financial Protection Bureau and several state attorneys general, including Schneiderman, reached last week with Aequitas Capital Management, a student loan company that saddled students of the now-bankrupt Corinthian Colleges chain with loans they couldn’t afford. (The proposed settlement requires the approval of a U.S. District Court in Oregon.)
The proposed settlement would provide $183.3 million in loan forgiveness and reduction to 41,000 students.
Schneiderman’s office also announced last week that over 800 students of the for-profit DeVry University (now renamed Adtalem Global Education with the ticker symbol ATGE) would share in a $2.25 million settlement for deceptive ads that exaggerated the employment success of the school’s graduates. (That settlement was originally reached in January.)
In his announcement today, Schneiderman laid out a three-pronged attack his office will pursue against fraud and abuse in the student loan industry:
1. Pressing “full speed” ahead with cracking down on “predatory for-profit colleges and the loan servicers who enable them” and continuing to investigate potential abuses in student debt collection.
2. An inquiry it recently opened into the collection practices of the National Collegiate Student Loan Trust, which holds over 800,000 private student loans and is allegedly pursuing cases against students it says have fallen behind on their payments.
“We’re going to find out whether New York students have been targeted and defrauded,” said Schneiderman in today’s announcement.
3. Opposing the federal government’s delay in implementing a rule that would make it easier for defrauded student loan borrowers to pursue debt forgiveness. He joined 18 other attorneys general in a lawsuit suit against Education Secretary Betsy DeVos opposing the delay.
“DeVos decided it was more important to protect predatory colleges from lawsuits … and called it a ‘regulatory reset,’” writes Schneiderman.
He concludes his statement noting that “when a student loan company breaks the law and misleads thousands of students into taking on loans they can’t afford, that company should be held accountable.”
New York student loan borrowers own on average $30,000, according to Schneiderman. Nationally more than 40% of student loan borrowers owe $20,000 or more, double the percentage of 15 years ago, according to the CFPB.
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