The Biden administration guidance has now framed student loan company oversight as a partnership between states and the federal government. “We hope this move signals the Department of Education is moving quickly towards expanding accountability.'
The Biden administration revoked legal guidance issued by the Betsy DeVos-era Department of Education, knocking down an obstacle to states regulating student loan companies.
“Nothing in this guidance puts any requirements or onus on state governments to play a supporting role, but what it does allow is an invitation or encouragement for states to do so and for states that have already entered into the fray some political and perhaps legal cover,” said David Rubenstein, a professor at Washburn University School of Law and an expert on preemption, or the interaction between federal and state laws.
Though both the guidance announced this week and the DeVos-era memo are focused on the wonky topic of preemption — essentially the idea that federal law supersedes state law in cases where they’re in conflict — the government’s and courts’ interpretation of how preemption applies to student loan regulations has implications for student loan borrowers paying their bills.
As more states began implementing these laws, servicers fought back and they asked the Trump administration for help. In 2017, the National Council of Higher Education Resources , a student loan industry trade group, wrote to Department of Education officials asking them to issue guidance saying that student loan servicers were governed by federal — not state — law.
Courts didn’t give the DeVos memo much weight, they may do the same with the Biden-era guidance Rubenstein, the law professor, described the Trump administration’s interpretation and application of the preemption doctrine as “very dubious,” which is why courts declined to give it deference.
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