The Department of Education issued a new declaration into the federal register Friday morning that would curtail the ability of states to regulate student loan debt collectors.
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 Nalnet 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 Education Department calls the language it issued an “interpretation,” which leaves it wide open to legal challenges from state prosecutors eager to take on student-lending firms.
The move comes at a time when attorneys general in several states are pursuing servicers for what they claim are abuses against student borrowers. On March 1, a superior court judge refused to dismiss a lawsuit filed by Massachusetts Attorney General Maura Healey against Pennsylvania Higher Education Assistance Agency. Healey was suing the it for, among other things, overcharging students.
The Trump administration through the Department of Justice argued that Healey does not have authority to sue; Justice Department officials argued that the were seeking to “preserve the important federal interests in cost-effectively and uniformly administering and streamlining the federal student loan programs.”