The Trump Admin is Attempting to Shield Student Loan Companies from State Consumer Protection

Washington, D.C. March 9, 2018 – Today, the U.S. Department of Education issued an interpretation of federal law that purports to preempt state laws governing student loan debt collection companies.

Christopher Peterson, a Senior Fellow at the Consumer Federation of America and the John J Flynn Endowed Professor of Law at the University of Utah, made the following statement:

“The long-standing view of both federal and state governments has been that the Higher Education Act does not override state laws that provide additional protection to student loan borrowers, as long as those laws do not actually conflict with federal law. Now the Trump Administration is attempting to trample states’ authority and the best interests of student loan borrowers to pad the bottom line of debt collection businesses.”

“The Trump Administration’s action is legally dubious and should be ignored by state regulators working to protect millions of Americans who deserve honest and fair treatment from debt collectors.”

“Nowhere in the Administration’s interpretation document does the Department of Education cite statute from Congress that says the Department is authorized to block state efforts to hold debt collection business accountable for illegally overcharging the public. That’s because such a law does not exist.”

“In its announcement the Department of Education said, it ‘continues to oversee loan servicers to ensure that borrowers receive exemplary customer service and are protected from substandard practices.’ But, last year a million Americans defaulted on their student loans. There is nothing exemplary about a million American families facing a financial crisis each year.”

“In the past, the Department of Education always told its contractors to follow state law because it’s the law. Now Secretary DeVos is trying to make it easier for student loan debt collectors to use deceptive tactics in collecting student loans.”

The Consumer Federation of America is a nonprofit association of more than 250 consumer groups that was founded in 1968 to advance the consumer interest through research, advocacy, and education.