Herring files comments with the SCC supporting newly passed student borrower protections and student loan servicer regulations

RICHMOND(August 17, 2021) – Attorney General Mark R. Herring has filed comments with the State Corporation Commission (SCC) in support of a newly passed “bill of rights” for Virginia student borrowers – laws that protect borrowers by regulating student loan servicing in Virginia. The Office of Attorney General has authority under these new laws to investigate claims of misconduct by student loan servicers and to take action when appropriate. Virginia is home to more than one million student borrowers, who collectively owe nearly $42 billion in student loans.

“More than one million Virginians are saddled with the crippling weight of student loan debt – something that negatively affects almost every aspect of their lives,” said Attorney General Herring. “My office has worked hard to help student loan borrowers in the Commonwealth, especially in instances where the loan servicer has taken advantage of borrowers and acted deceptively. These new student borrower protections and student loan servicer regulations are critical to my office’s ongoing mission to ensure Virginia borrowers are protected from bad actors, which is why it was so important that we file these supportive comments with the SCC.”

In February 2020, the General Assembly passed legislation with strong bipartisan support that created Chapter 26 in Title 6.2 of the Virginia Code and that tasked the SCC with issuing regulations implementing Chapter 26. Chapter 26 protects student borrowers from servicers who would, among other things, engage in unfair or deceptive conduct, misapply loan payments, or misreport information to credit bureaus. It also gives the Office of Attorney General the authority to investigate and to bring enforcement actions against servicers suspected of violating these student borrower protections.

Attorney General Herring’s comments come in response to challenges raised by both the Student Loan Servicing Alliance (SLSA) and the National Association of Student Loan Administrators (NASLA) claiming that Chapter 26 and its related regulations, which are currently under consideration by the SCC, are unconstitutional. In the filed comments, Attorney General Herring explains why SLSA and NASLA are simply wrong and why Virginia’s student borrower bill of rights is constitutional. Attorney General Herring argues that federal law does not preempt these new laws and that these new laws do not violate the doctrine of intergovernmental immunity. Attorney General Herring concludes his comments by saying that Chapter 26 and the proposed regulations “are entitled to both a presumption of constitutionality and a presumption against preemption. And by simply raising general constitutional questions . . . , NASLA and SLSA fail to show they are unconstitutional.”

Herring’s Previous Work Fighting to Protect Student Borrowers

Last month, Attorney General Herring filed an amicus brief that challenged action taken by the Trump Administration’s Department of Education that unlawfully repealed and replaced federal “borrower defense” regulations. In October 2018, Attorney General Herring announced that a federal judge had rejected the Trump administration’s challenge to the Borrower Defense Rule, ordering its immediate implementation for students nationwide. This ruling followed a victory Attorney General Herring won in federal court after he and a coalition of state attorneys general challenged the U.S. Department of Education’s plan to abruptly rescind its Borrower Defense Rule, which was designed to hold abusive higher education institutions accountable for cheating students and taxpayers out of billions of dollars in federal loans. The immediate implementation of the Borrower Defense Rule meant that the U.S. Department of Education had to automatically discharge $381 million in loans for students whose schools closed.

Attorney General Herring has taken major actions against for-profit colleges for misleading students. In November 2015, for-profit education company Education Management Corporation announced it would significantly reform its recruiting and enrollment practices and forgive more than $2.29 million in loans for approximately 2,000 former students in Virginia through an agreement with the Attorney General and a group of state attorneys general. Nationwide, the agreement required the for-profit college company to forgive $102.8 million in outstanding loan debt held by more than 80,000 former students.

In December 2016, the Attorney General announced that more than 5,000 Virginia students formerly enrolled in schools operated by Corinthian Colleges, Inc. may be eligible for loan forgiveness. This came after the U.S. Department of Education found that Corinthian College and its subsidiaries published misleading job placement rates for many programs between 2010 and 2014. Following this announcement, Attorney General Herring urged Secretary DeVos and the Department of Education to follow through on their commitment to cancel student debt for students in Virginia and around the country who were victimized by Corinthian Colleges’ practices.

Attorney General Herring announced in January 2019 that he and 48 other attorneys general reached a settlement with for-profit education company Career Education Corporation (CEC). The terms of the settlement required CEC to reform its recruiting and enrollment practices and forgo collecting about $493.7 million in debts owed by 179,529 students nationally. In Virginia, 3,094 students will receive relief totaling $8,022,178.