Student Loan Policy Help from Attorneys General

Watching changes in student loan policy in the U.S. is, I am finding, similar to watching this year’s spring weather try to make its official appearance in Northern California. We keep getting a few days bursting with light and gradual warmth. Then the week will turn suddenly, dropping to the 30s or 40s and dousing us in rain. But yes, there are moments of sunshine, and we are seeing grasses and wildflowers peek through the red-brown dirt and gravel driveways and side-of-the-road fields. Those moments of sunshine and growth are also peeking out from what can feel like the long winter of student debt. One of these ways: people in power raising their voices. More specifically: 30 bipartisan attorneys general have recently signed a letter to Congress asking them to avoid legislation that curtails a state’s ability to regulate how student loan providers behave.

PROSPER and an Individual State’s Decision

In February I wrote a post in which I promised to keep us updated on H.R. 4503, also known as the PROSPER Act. Then, in the last post I wrote we talked about the state of Washington’s new law regarding student loan providers. Well, these topics have converged in the letter by the attorneys general. Within the PROSPER Act, it seems, is a section delineating rules for withholding state ability to regulate student loan providers. 

As a quick review, the state of Washington made a move to regulate student loan providers a little more. Their new law also gives momentum to organizing help for students through providing free advocacy and advice. There is pushback on this law, including a potential legal suit that claims this new law preempts federal law. 

If PROSPER passes as is, it will be another major roadblock to states preventing loan providers from unfairly treating borrowers. Washington and all other states could find it almost impossible to work around.

The attorneys general make, as I see it, two primary pleas: Let us help students where we can, and let us not preempt state rights.

State Rights

In the letter, the attorneys general remind readers that each state has a legal right “to protect their residents from fraud and other abuses.” There have been enough legal cases recently in the loan-fraud department to legitimize this as a reason for states to retain the ability to regulate and keep a close eye on loan providers.

Helping Students

Alongside their legal arguments, the attorneys were clear that their motivation was to protect student borrowers. Shouldn’t we take extra steps to help keep students informed and protected as they borrow and pay back? State and federal law should share this motivation – which is one of the strong appeals made in the letter.

The Pushback

One of the main pushbacks is that student loan providers do not want states to have this regulatory control. It will mean more reporting and extra time spent to appease new requirements. The attorneys general saw the reluctance of many loan providers as an indication that they were perhaps enjoying liberties they were not meant to enjoy. Namely, that these businesses and systems were not open with and helpful to people paying back their student loans. 

As Simple as Possible

Another pushback from some people, especially those who helped craft PROSPER, enjoy the simplicity of states all sharing laws.

This reminds me of a lovely proverb, often attributed to Einstein, recently quoted by Provost Julian Schuster of Webster University: “Everything in life should be made as simple as possible, but no simpler than that.” Schuster was being interviewed on a podcast and was talking about PROSPER. The interviewer asked what Schuster thought about the innumerable changes proposed in such a short amount of time. He specified his question, asking about the way PROSPER purportedly makes the loan system clearer and simpler. That is when Shuster mentioned the simplicity quote: Basically, yes, simplicity is elegant and helpful. However, sometimes a tricky topic will, even in its simplest rendition, allude brevity. We end up needing many tools and careful webs of words to accurately explain such topics.

In the case of student debt in the U.S., intricate laws and individualized state rules are, to some extent, necessary. In their letter to Congress, the attorneys general demonstrated determination to apply the thought and work necessary for this issue. They have marched their words up to the relevant readers, prepared with determined minds and readiness to take steps to work against accidentally overs-simplifying a huge issue. 

So, let us be encouraged that there are such voices at work. Legal processes are often slow, but voices from 30 attorneys general from varying political leanings will be hard to ignore. We will try and keep you up-to-date with where this particular aspect of the PROSPER Act will end up. Hopefully, as is gradually happening with spring growth, policies that help people effectively pay back student loans will continue shaping up and growing.

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