The Department of Education is preparing to announce that companies collecting on federal student loans are to be pre-empted from state regulators and lawmakers, according to a published report. Those companies will only be regulated at the federal level, according to the report, which indicated that a “notice of interpretation” is being crafted.
The student loan industry has lobbied for “months” for federal protection from state rules and laws, according to the report, as more than a dozen states are working on laws that would aim to protect individuals with student loan debts by increasing regulations over student loan companies.
Consumer advocates are criticizing the development, arguing that the Trump administration is siding with companies over individuals.
“It’s not surprising that this administration is weighing in on the side of industry over students and taxpayers,” said Whitney Barkley-Denney, legislative policy counsel at the Center for Responsible Lending, a consumer group. “This is just a different verse of the same song we’ve been hearing over the past year” from the Education Department.
The decision by the Education Department would mirror an attempt made earlier this year by the Department of Justice, when it defended a student loan company that was accused of violating a state consumer protection law in Massachusetts. The Justice Department argued that the servicer was pre-empted from having to comply with state law.
The Education Department has also instructed student loan companies, including collection agencies, from responding to requests fro third parties, which includes state regulators.
