From the Web: Education Secretary Issues Guidance on State Regulations of Student Loan Servicers
The U.S. Department of Education said the federal government—not the states—has the authority to regulate student loan servicers.
3/12/2018 3:23 PM
The U.S. Department of Education (DOE) issued guidance stating the federal government, rather than the states, has authority to oversee its contractors for student loan servicing, The Washington Post reports.
“State regulation of the servicing of direct loans impedes uniquely federal interests,” the department wrote, according to the article. “State regulation of the servicing of the Federal Family Education Loan Program is preempted to the extent that it undermines uniform administration of the program.”
Some experts say the guidance is not enough to block state-level regulation of student loan servicing practices.
“Nowhere in this document does the Department of Education quote a statute from Congress that says the department is authorized to block states from stopping deceptive debt collection practices. That’s because such a law does not exist,” said Christopher Peterson, a law professor at the University of Utah and former enforcement attorney at the Consumer Financial Protection Bureau, according to the article.
It also notes some states already require student loan servicers to obtain a license and other states are in the process of developing regulations.
“In Friday’s guidance, the department argues that it has sufficient consumer protections in place and that state efforts to impose more undermines ‘the goal of simplifying the delivery of student loans to borrowers, eliminating borrower confusion, avoiding unnecessary costs to taxpayers and creating a more streamlined student loan program that could be managed more effectively at the federal level,.’” The Washington Post reports.
Student loan servicing organizations, such as the National Council of Higher Education Resources, support the DOE’s efforts to implement guidance for federal student loan servicing.
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