Attorney General Jim Hood joined a bipartisan group of 30 attorneys general in sending a letter to Congress, urging them to reject legislation that would block states from preventing and combatting fraud and abuse by the student loan industry.
The pending version of the Higher Education Act reauthorization includes language to preempt state-level oversight of private companies that originate, service, or collect on student loans.
Describing the language as “an all-out assault on states’ rights and basic principles of federalism,” the letter urges Congress to strip the language from House bill and to omit it from consideration in the Senate.
As of the fourth quarter of 2017, U.S. borrowers owed an estimated $1.38 trillion in federal and private student loans—more than for auto loans, credit cards, or any other non-mortgage loan category.
“Mississippians alone have a total outstanding student loan debt balance of $12.69 billion,” said General Hood. “States are currently able to investigate and prosecute fraudulent student loan practices that are so egregious, students are provided with complete loan forgiveness. If Congress does not reject this legislation, states will no longer be able to provide these types of protections to consumers, and their vote will be another example of billion-dollar companies buying legislation.”
In recent years, state attorneys general have investigated significant, far-reaching abuses in the student loan industry and won settlements returning tens of millions of dollars to student borrowers.
Hood said that there have been two major state-led investigations of student loan abuses that Mississippi has recently been involved in and they are the Education Management Corporation, as well as, the Corinthian Colleges.
- Education Management Corporation: The investigation uncovered that the school’s recruitment practices misled students about program costs, graduation rates, and job placement rates. As part of the multi-state settlement, state attorneys general obtained over $100 million in loan forgiveness, including more than $1.2 million for Mississippians.
- Corinthian Colleges: State attorneys general were critical in uncovering widespread misconduct at the now-defunct Corinthian Colleges, which made misrepresentations about post-graduate employment rates. The attorneys general worked to obtain relief for repayment of the students’ loans for tens of thousands of defrauded students nationwide. Nearly 6,000 Mississippians who attended and used loans at the for-profit schools were eligible for federal student loan cancellation.