A bipartisan coalition of 30 state attorneys general led by New York AG Eric Schneiderman and Colorado AG Cynthia Coffman have sent a letter to members of Congress urging them to reject a proposed amendment to the Higher Education Act (HEA) that would preempt state law requirements for servicers of federal student loans.
The letter followed (but did not mention) the U.S. Department of Education’s publication of an interpretation asserting that the HEA preempts state regulation of federal student loan servicers. Both the AGs’ letter and the ED’s interpretation come in the wake of a wave of new state student loan servicing laws and enforcement activity.
The proposed HEA amendments would preempt state law requirements regarding licensing, disclosures, communications with borrowers that apply to the origination, servicing, or collection of a federal student loan.
The AGs assert that, contrary to ED’s interpretation, the amendments “would represent a stark departure from the traditional cooperative state-federal approach to enforcement—and would wrongly cast aside the long tradition of congressional deference to state prerogatives under the HEA.” Despite the AGs’ characterization, the ED’s interpretation is based on, and consistent with, the HEA and federal preemption law.