It clarified that federal education laws preempt state laws based on a review of governance of student loan servicers and relevant court decisions.
08/18/2023 8:30 A.M.
1 minute read
The Department of Education (DOE) has updated its position on state and federal regulation of student loan servicing under the Federal Direct Loan Program and the Federal Family Education Loan Program.
The position addresses state laws governing student loan servicers who work with consumers on federal student loans.
The DOE reviewed the issue and its past interpretations from 2018 and 2021 and found that state laws for student loan servicers are preempted by the federal Higher Education Act, according to a notice in the Federal Register.
“This interpretation will help facilitate close coordination between the [d]epartment and its [s]tate partners to further enhance both servicer accountability and borrower protections,” it stated.
The department accepted public comments before issuing its revised position and addressed concerns to ensure its position on state and federal law preemption reflects all state laws governing licensure of student loan servicers. It also clarified that its position reflects court decisions that are most relevant to preemption of state laws related to student loan servicing.
The department’s last review of its position on state student loan servicing laws in 2021 encouraged state collaboration on student loan servicing but clarified that federal law does preempt states in “certain narrow areas,” according to a news release.
Read the department’s Federal Register notice issued in July for more information on the latest interpretation.
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