Department Issues Notice in Favor of State Oversight of Servicers

"Individual states are able to regulate federal student loan servicers in most circumstances without being preempted by the Higher Education Act of 1965, according to a notice of interpretation issued Monday by the Department of Education," Inside Higher Ed reports.

..."The department said the new interpretation will help facilitate collaboration among the states and federal government to help protect student borrowers, but Justin Draeger, president and CEO of the National Association of Student Financial Aid Administrators said the policy change may cause more confusion instead.

'For years, NASFAA and other advocates have been calling on the Department of Education to issue one, standardized set of policies and procedures on student loan servicing,' Draeger said. 'Allowing states to preempt federal standards based on where student loan borrowers attended or where they live sounds operationally challenging, creates confusion for students and works against the idea of a single, unified loan servicing manual.'"

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Publication Date: 8/10/2021

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