Student Loan Reform: Rights Under the Law, Incentives Under Contract, and Mission Failure Under ED

56 Pages Posted: 6 Feb 2021 Last revised: 12 Feb 2021

See all articles by Prentiss Cox

Prentiss Cox

University of Minnesota Law School

Kathleen C. Engel

Suffolk University Law School

Date Written: October 6, 2020


The federal student loan program is a disaster. Over five million people are in default even though Congress provides all borrowers with the right to affordable payments and to discharge of borrowers’ debts in specific circumstances. Many student loan borrowers who could benefit from these rights are unaware they exist or are unable to exercise their rights.

This Article examines the dynamics and incentives that drive the longstanding problem of high default rates and repayment distress among student loan borrowers. Our core finding is that the Education Department adopts a creditors-rights framework for student loan repayment, which is inapposite for student loans because borrowers have unique, federal rights that are unavailable in market credit transactions. We then demonstrate why the mission and track record of the Education Department, including its failure to manage and oversee servicers, make it unlikely that the Department would ever adopt a borrower-rights focus on student loan repayment.

We build the case for the creation of the Student Borrower Protection Agency, modeled in part on the Consumer Financial Protection Bureau (CFPB). The function of the SBPA would be to serve student loan borrowers. Just as the country needed the CFPB to fill regulatory gaps in consumer financial protection, we need an agency that will deliver to student loan borrowers the rights promised under federal law.

Keywords: student loans, consumer credit, loan servicing, CFPB, consumer protection

Suggested Citation

Cox, Prentiss and Engel, Kathleen, Student Loan Reform: Rights Under the Law, Incentives Under Contract, and Mission Failure Under ED (October 6, 2020). Harvard Journal on Legislation, Forthcoming, Available at SSRN: or

Prentiss Cox (Contact Author)

University of Minnesota Law School ( email )

229 19th Avenue South
Minneapolis, MN 55455
United States
612 625 6810 (Phone)

Kathleen Engel

Suffolk University Law School ( email )

120 Tremont Street
Boston, MA 02108-4977
United States
617-994-6831 (Phone)


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