In an effort to keep the regulation of student loan servicers under the federal government, the Department of Education has issued a mandate that curbs the ability of states to regulate companies collecting on student loans.
For months, it had been rumored that the Trump administration was considering imposing the mandate, which is not an official rule, that would shield student loan servicers like Navient and Nelnet from state regulation. It would instead place the responsibility for regulating these companies on the federal government — which is what these companies have argued for in court.
The National Council of Higher Education Resources, which represents student loan servicers, hailed the move as a win for the industry:
“NCHER and its membership have long believed that the federal student loan programs – both the Federal Direct Loan Program and the Federal Family Education Loan Program – are national in scope and need to be administered uniformly throughout the 50 states,” James Bergeron, the group’s president, told The Intercept. Dealing with 50 different state laws and oversight officials creates a “regulatory maze” for companies, Bergeron said, and the new declaration will help create a more consistent playing field.
But the move comes at a time when several states are going after student loan servicers for abusive practices, and Friday's mandate has the potential to upend those cases.
Massachusetts Attorney General Maura Healey is one of the attorneys general currently pursuing legal action against a debt collector.
Healey has sued the Pennsylvania Higher Education Assistance Agency for overcharging students as well as other alleged abuses, and she claims that this latest move by Education Secretary Betsy DeVos will not intimidate her.
“Secretary DeVos can write as many love letters to the loan servicing industry as she wants, I won’t be shutting down my investigations or stand by while these companies rip off students and families,” Healey said in a statement to The Intercept. “The last thing we need is to give this industry a free pass while a million students a year are defaulting on federal loans.”
Healey is not alone in her disdain for the change.
“DeVos’ actions will make it harder for people to access higher education,” [American Federation of Teachers] President Randi Weingarten said. “With this move, she has castrated any state legislators and attorneys general from providing meaningful oversight of student loan services, yet she continues to fail to do so herself.”