A consumer advocacy group on Monday sued the U.S. Department of Education over the agency’s refusal to release documents showing how the federal government awards bonuses to debt collection companies it hires to recover defaulted student loans.
The National Consumer Law Center charges in its lawsuit that the department violated the Freedom of Information Act by withholding records relating to the performance and incentive pay for the government’s contracted debt collectors. The group had sought information about the department’s methodology for evaluating and compensating the companies. It also requested documents that show how individual debt collection companies have performed.
The Education Department asserted, according to court documents, that it may keep the documents secret under an exemption to the information law that protects “trade secrets” and certain commercial or financial information.
Persis Yu, a lawyer at the law center, said in a statement that “collection agencies routinely violate consumer protection laws and prioritize profits over borrower rights.” She added: “Taxpayers and student loan borrowers have a right to information about the impact of the Education Department’s policy of paying outside debt collectors on the rights of borrowers.”
At a roundtable discussion about her efforts to clamp down on campus sexual assault, Senator Claire McCaskill says she's eyeing tougher penalties, mandatory climate surveys and other changes. for headline, maybe 'Senate Warning on Sexual Assault'? dl ** looks good /ms
Navient, the loan-servicing company formerly known as Sallie Mae, disclosed to investors Friday that it expects to pay an additional $103 million to settle two federal investigations, on top of the $70 million it already set aside last year for that purpose. The company is facing investigations from the Federal Deposit Insurance Corporation, the Department of Justice, and other federal and state agencies over how it managed and processed the payments of student loan borrowers, including active-duty servicemembers.
The spin-off of Sallie Mae’s loan-servicing business into its own independent company, Navient, was officially completed at the end of April. Navient now inherits all liability stemming from the federal and state investigations of Sallie Mae’s loan-servicing business, the company said. The FDIC has cited Sallie Mae for unfair or deceptive acts involving the way it made disclosures to borrowers and assessed certain late fees.
Navient said Friday that, based on its discussions with the FDIC, the company believes it will be required to refund $30 million worth of certain late fees to borrowers of Sallie Mae loans dating back to November 2005. In addition, in an effort to “treat all customers in a similar manner,” Naveint said it also expected to “voluntarily” reimburse $42 million in late fees for borrowers whose loans were not owned by Sallie Mae but were serviced by them.
The Department of Justice has been probing whether Sallie Mae cheated active-duty servicemembers by not providing them with the interest-rate discount to which they are entitled under federal law. To settle those allegations, Navient said it expected to pay out $60 million.
None of the settlements are finalized, the company said. However, accounting standards generally require companies to disclose potential losses only when they are probable and reasonably estimable.
In addition to the Department of Justice and FDIC investigations, the Consumer Financial Protection Bureau is also probing the companies. They are also facing investigations by a number of states, led by Illinois Attorney General Lisa Madigan.
Consumer advocates and a growing number of Senate Democrats have said they are concerned that the Education Department is too lax in its oversight of how Sallie Mae services loans on behalf of the government. Some have called on the Education Department to assess penalties on Sallie Mae or to end its servicing contract with the company.
Tufts University and the U.S. Department of Education have resolved an unusual dispute over how to settle a finding that the university’s handling of sexual assault cases violated federal law.
University and federal officials said Friday that Tufts had formally recommitted to the signed agreement that it backed out of earlier this month, which prompted a warning from the Education Department that the university’s federal funding may be in jeopardy.
Catherine Lhamon, the assistant secretary for civil rights, confirmed in a statement Friday that the university was no longer in breach of the agreement.
“I congratulate Tufts University for taking swift action to cure its breach of its April 17 agreement with” the department’s Office for Civil Rights, she said. “I look forward to working with [Tufts] President [Anthony] Monaco and the university community to ensure the safety of all students on campus.”
Monaco “officially” recommitted to the signed agreement during a meeting on Thursday with Lhamon, the university said. Following student protests on campus, a university spokeswoman first said last Friday that the university was recommitting to the agreement.
The standoff began last month when Tufts withdrew from an agreement it had signed nine days earlier to resolve a Title IX complaint against the university. The Education Department responded by saying that Tufts had breached the agreement and warned that officials might seek to cut off the university’s federal funding if the matter was not resolved in 60 days.
At the time, university officials said they were backing out of the agreement because they had signed it under the understanding that federal officials were concerned only with a previous violation of Title IX on the campus, not a current issue. The university said it strongly disagreed with the conclusion by the Office for Civil Rights that its current sexual assault policies violated Title IX.
The department’s announcement about the Tufts case came as the Obama administration was promoting its efforts to push colleges to clamp down on sexual assaults. The administration also publicly named, for the first time, all of the 55 colleges that the Education Department is probing for their handling of sexual assault cases.
Separately, the Education Department announced Friday that Virginia Military Institute had violated Title IX by kicking out pregnant cadets and not properly handing sexual harassment and assault cases. Federal officials and VMI have entered into an agreement to resolve the violations, which requires the institution to make several changes to its policies.
The American Council on Education, the umbrella lobbying organization for colleges and universities, on Wednesday said that allowing college athletes to unionize would produce a litany of bad consequences.
In a letter to Representative John Kline, the Republican who chairs the House education committee, Molly Corbett Broad, the group’s president, took issue with a decision last month by a regional director of the National Labor Relations Board to classify Northwestern University football players as employees.
Broad said that such an issue should be addressed by Congress rather than be decided by an administrative agency. Her letter came as Kline, who has been critical of the NLRB decision, is set to hold a hearing today billed as an inquiry into allowing “big labor on college campuses.”
Broad also made the case against allowing athletes to unionize by citing “a range of negative and troubling consequences” that would flow from such a decision. Athletic scholarships would become taxable income under the Internal Revenue Code, and would therefore potentially cost athletes money, she said. In addition, if college athletes were able to collectively bargain with their colleges, such negotiations would “undermine the collegial, academic culture” on campuses. And, if college athletic unions were successful in increasing the compensation of their members, the reallocation of resources “would jeopardize institutions’ ability to offer other sports and the educational opportunities they provide to male and female athletes who may not receive athletic scholarships,” the letter said.
Proponents of letting college athletes unionize have also been taking their case to Capitol Hill in recent months. The College Athletes Players Association, which represents the Northwestern players, has been holding meetings with lawmakers, seeking to garner support and fend off any legislative attempt to stop their organizing efforts.
The cost of borrowing money from the federal government to pay for college will increase in the coming academic year.
Interest rates on most federal student loans are now set to rise following Wednesday’s sale of 10-year Treasury notes, the government debt to which rates are tied.
The interest rate on new loans for undergraduate students will increase to 4.66 percent, up from the current 3.86 percent. The cost of new direct loans for graduate students will jump to 6.21 percent from the current 5.41 percent.
A bipartisan accord struck in Congress last year pegged the interest rates on federal student loans to the government’s borrowing cost. The government now sets student loan interest rates each year based on the last auction of Treasury 10-year notes prior to June 1.
Loans disbursed starting July 1 will reflect the new rates, which are fixed for the term of the loans. The interest rates on existing federal direct loans are not affected by the changes, though some Democrats in Congress this week said they were pushing legislation that would allow borrowers to refinance their existing loans at current rates.
The following are current and future rates for student loans issued by the U.S. government:
Congressional Democrats on Tuesday announced legislation to allow existing student loan borrowers to refinance their debt at lower interest rates.
Senator Elizabeth Warren of Massachusetts and 22 of her Democratic colleagues introduced a bill that would let borrowers who took out both federal and private loans before 2013 to refinance that debt at the current interest rate on federal student loans. “Exploding student debt is crushing young people and dragging down our economy,” Warren said in a statement. “Allowing students to refinance their loans would put money back in the pockets of people who invested in their education.”
Representatives George Miller of California and John Tierney of Massachusetts plan to introduce identical legislation in the House. The refinancing program would be paid for under the Democrats’ proposal by enacting the so-called “Buffett Rule,” which would end some tax breaks for millionaires. That’s likely to face stiff opposition among Republicans.
The proposal is part of a broader election-year effort by Democrats to focus on college affordability and rising student loan debt. Other proposals by Senate Democrats would seek to hold colleges more responsible for student loan defaults.
Under a bipartisan agreement reached last year, interest rates on federal loans are now tied to Treasury notes. For the current academic year, interest rates were set at 3.86 percent for undergraduates and 5.41 for graduate students. The Congressional Budget Office projects that those rates will increase for the coming academic year to 5.09 percent and 6.64 percent, respectively. The rates will be officially set after a Treasury note auction this week.
After withdrawing last week from a signed agreement with the Education Department’s Office for Civil Rights to resolve a Title IX complaint, Tufts University has recommitted to the agreement, a spokeswoman confirmed on Friday.
“We consider the signed agreement to be in effect,” Kimberly M. Thurler, a university spokeswoman, said in an email.
The university had “revoked” its signature on the agreement on April 26 -- nine days after first signing it -- once the OCR said it was going to find the university’s current policies out of compliance.
University officials said they were “surprised and disappointed” in that finding and that they had signed the agreement under the pretense that the OCR had only determined a previous violation of Title IX, not a current issue of noncompliance.
That led the OCR to take the unusual step of warning the university that it might have sought to terminate federal funding to the institution if it did not resolve the issue within 60 days.
More than 100 students rallied on Thursday to protest Tufts’ decision to withdraw from the agreement.
Following that rally, the university said in a statement Thursday that it acknowledged the OCR’s position that the university had breached its agreement by withdrawing from it.
The university further said it had “had productive conversations with OCR regarding the issue of Title IX compliance” and that it expected “those conversations will move toward a successful conclusion in the very near future, well within the sixty-day period that has been stipulated.”
Anthony P. Monaco, the university’s president, will travel to Washington next week to discuss the university’s Title IX compliance issues with OCR officials in person, Thurler said.
The university also said that, in spite of its disagreement with the OCR it was pushing ahead, on a voluntary basis, with an array of projects aimed at combating sexual assault on the campus. One element of the OCR agreement that was unusual was monetary compensation to the female student who filed the Title IX complaint that alleged the university mishandled her sexual assault case, which started in 2010.
The lawyer representing that student, Colby Bruno of the Victim Rights Law Center, said in an interview this week that monetary compensation mentioned in the OCR agreement was governed by a private arrangement the university previously struck with her client. It was therefore not affected by the university’s dust up with the OCR last week, she said.
The OCR’s finding that Tufts’ current policies are out of compliance came last week as the Obama administration promoted its efforts to push colleges to clamp down on sexual assaults. In addition to urging colleges to do more on the issue, the administration also publicly named, for the first time, all of the 55 colleges that the Education Department is probing for their handling of sexual assault cases.