Education Dept. to Announce Loan Servicers 'Off-Limits' to State Regulators

The U.S. Department of Education is planning to announce that only federal agencies, and no state regulators, have oversight authority over student loan servicing entities, reports Inside Higher Ed and Politico.

State regulation servicers, which handle borrowers' payment of student loan debt and provide advice on repayment plan options, will be blocked.

The student loan industry has for months lobbied the federal government for protection from state efforts to regulate their practices. They say the involvement of states makes it difficult and costly for companies to operate across the country, Politico reported.

Consumer advocates and nearly half of the nation's attorneys general disagree; they argue that states have the right to oversee companies operating within their borders to collect loan payments from their residents, reported Politico.

Democratic state officials have filed several lawsuits against loan servicers in recent years, alleging poor customer service and illegal practices. The Consumer Financial Protection Bureau has also been involved, Inside Higher Ed reported.


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