DeVos plan protects student loan collectors from state regulators

Secretary of Education Betsy DeVos is set to issue a "notice of interpretation" stating state governments cannot regulate student loan collectors. Photo by Mike Theiler/UPI

Feb. 27 (UPI) — A Trump administration proposal could shield student loan collection companies from state regulators accusing them of misleading borrowers.

Education Secretary Betsy DeVos is set to issue a “notice of interpretation” stating companies collecting federal student loans can only be regulated by the federal government, not state lawmakers.

“The department believes such regulation is preempted by federal law,” a draft Federal Register notice stated. “State regulation of contractors for the department that service direct loans implicate uniquely federal interests.”

Half of the nation’s state attorneys general issued a joint letter asking DeVos to reject requests to block state investigations into student loan companies.

“These requests defy the well-established role of states in protecting their residents from fraudulent and abusive practices,” the states said. “The department cannot sweep away state laws that apply to student-loan servicers and debt collectors.”

Attorneys general in Massachusetts, Illinois, Washington and Pennsylvania also have filed lawsuits against the Education Department’s loan contractors for alleged consumer abuses.

The president and CEO of student loan company Navient, Jack Remondi, said federal law “makes it very clear that these are federally regulated loans and not subject to additional state rules or regulations.”

“The changing regulatory winds here make that something that will be more prominent,” Remondi said.

California, Connecticut, Illinois and the District of Columbia have enacted their own laws requiring student loan servicers to be licensed and regulated.

DeVos’ forthcoming notice is expected to resist such laws by targeting state legislation attempting to regulate companies collecting loans on behalf of the federal government.


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