Sens. Elizabeth Warren, D-Mass., and Cory Booker, D-N.J., sent letters to the Department of Justice and the Federal Trade Commission on Thursday morning, requesting the agencies reconsider a 2018 decision to allow two of the biggest student loan servicers merge.
"Without real incentives for the Education Department's student loan servicers to help solve our student debt crisis, borrowers across the country, who have zero choice in who services their loans, will be the victims of predatory practices,” the lawmakers -- who are fresh from their first 2020 Democratic presidential debate -- wrote in the letter.
They were also joined by Rep. David Cicilline, D-R.I.
The deal between to the services -- Nelnet Inc. and Great Lakes Educational Loan Services Inc. -- dates back to 2017, when Nelnet announced it would acquire the latter for $150 million. Although the DOJ had some concerns about the merger, officials ultimately approved it without imposing any conditions.
The deal was officially completed last February, meaning there’s only three, instead of four, federal student loan servicers. That means that a single company now services the loans of nearly 15 million borrowers, who in total hold roughly $400 billion in federal student debt, or about 40 percent of total student loan debt, according to a news release from Warren’s press office.
Warren and Booker’s scrutiny comes on the heels of a report published by the Education Department’s Office of the Inspector General, which found that the Education Department is failing to promote competition or to incentivize high-service student loan services, despite having the tools to do so.
"The new evidence of the Education Department's ongoing failure to protect students and adequately foster market competition in the current contracts reveal the need for DOJ and the Federal Trade Commission to retroactively review this merger,” the lawmakers argued in the letter, which was addressed to the head of the DOJ antitrust division Makan Delrahim and the FTC Chairman Joseph Simons.
Warren -- a fierce consumer advocate -- has proposed legislation to cancel student debt in the U.S. in the run-up to the 2020 presidential election. She has said she wants to pass legislation to cancel up to $50,000 in student loan debt for 42 million Americans, essentially canceling debt for 75 percent of borrowers. Individuals with incomes of more than $250,000 would not have their debts reduced.
Student loan debt is growing exponentially; currently, Americans are carrying about $1.6 trillion in debt.