Consumer advocates are accusing the Education Department of caving to pressure from the student loan industry to the detriment of borrowers after Betsy DeVos rescinded two Obama administration memos Tuesday, USA Today reports. According to NBC News, the memos called for government contracts to be awarded to companies that had proven themselves good at helping borrowers instead of companies that were best at collecting debts. The memos were issued by the Obama administration due to a history of student loan companies with government contracts mistreating borrowers, Bloomberg reports.
DeVos says the memos were rescinded because they had a "lack of consistent objectives," and to lessen the burden on taxpayers. One student loan expert says the move shows the government is backing student loan companies over borrowers. "This move is a big win for companies that have run roughshod over borrowers," a former student loan ombudsman for the Consumer Financial Protection Bureau tells USA Today. For example, with the Obama administration memos now revoked, one of the favorites to get an upcoming government contract is a company that was sued by the attorneys general of two states and the CFPB in January for allegedly taking advantage of borrowers to increase profits. Last month, DeVos rescinded another Obama-era memo that prohibited charging student loan borrowers huge fees in most cases. (More student loans stories.)
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