Court denies student loan servicer's bid to dismiss Massachusetts lawsuit

A court case playing out in Massachusetts could have implications for the U.S. Department of Education’s efforts to shield student loan contractors from state oversight.

A superior court judge on Thursday refused to dismiss a lawsuit filed in August by Massachusetts Attorney General Maura Healey against Pennsylvania Higher Education Assistance Agency, a company that manages student loans and grants on behalf of the government.

Healey has accused the company, which operates under the name FedLoan Servicing, of haphazardly handling two federal programs that encourage college graduates to enter fields serving the public good with the promise of loan forgiveness or financial aid.

The case has garnered the attention of the U.S. Department of Justice, which filed papers in January on the Education Department’s behalf arguing that federal law preempts Massachusetts’s claims against FedLoan.

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