When students go to college, it’s because they want a better life. Most New Yorkers can only afford it by taking on loans. For decades, that bargain paid off, with graduates paying off modest debt to make their aspirations a reality.
But today, the average student debt for New York borrowers is over $30,000. Out of school, they’re putting their paychecks toward paying off interest rather than starting families, buying homes, and starting businesses. And some of the nation’s largest student loan companies are worsening the crisis by abusing the system to force borrowers to pay more than they have to, driving the most vulnerable into default.
I won’t allow a generation of New Yorkers to get victimized by the very system that was created to help them get ahead. I’ve directed my office to aggressively pursue fraud and abuse in the student loan industry, and we are pressing ahead at full speed.
First, we’re cracking down on predatory for-profit colleges and the loan servicers who enable them. Last week, I announced a settlement with Aequitas Capital Management, a student loan company that schemed with the now-bankrupt Corinthian Colleges chain to saddle New Yorkers, mostly in Rochester, with loans they could never afford. Hundreds of borrowers will receive full discharges of their debt, with an average of $6000 to $7000 in relief. And later this month, after a major investigation of misleading claims made by DeVry University, hundreds more students across New York State will get an average of $2800 in restitution.
Second, we’re examining potential abuses in student debt collection. Last month, my office opened an inquiry into the collection practices of the National Collegiate Student Loan Trusts, which hold over 800,000 private student loans. As the New York Times recently reported, the company is under scrutiny for allegedly pursuing cases against students it says have fallen behind on their student loans–and then failing to produce paperwork proving that they have the right to collect. We’re going to find out whether New York students have been targeted and defrauded.
Third, we’re holding the federal government to its legal duty to protect students. This past June, just before a federal rule was set to go into effect that would protect students from abuse and make it easier for defrauded borrowers to pursue debt forgiveness, Education Secretary Betsy DeVos decided it was more important to protect predatory colleges from lawsuits. Secretary DeVos put a hold on the rule and called it a “regulatory reset.” Weeks later, I joined with 18 fellow Attorneys General to sue Secretary DeVos and the Department of Education to get them to end their illegal delay.
It’s important for New York to step up. When a student loan company breaks the law and misleads thousands of students into taking on loans they can’t afford, that company should be held accountable.
In the months ahead, I will continue doing exactly that.