[Updated] Department of Education Wants to Block State Regulation of Student Loan Debt Collectors

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Update: The Department of Education published a notice in the Federal Register today, insisting that states back off in their regulation of federal student loan servicers.

“State regulation of the servicing of Direct Loans impedes uniquely federal interests,” said the filing. Additionally, the Department of Education insisted that separate state regulation “undermines uniform administration of the program.”

In the filing, the Education Department specifically calls out Massachusetts Attorney General Maura Healey, who has been suing a major federal loan servicer. The Department of Education claims that states like Massachusetts are seeking to forbid “conduct federal law requires and to require conduct federal law prohibits.”

However, this assertion is in conflict with 2016 guidance from the Obama administration, which indicated that state rules on student debt collectors wouldn’t be in opposition to federal law, according to reporting from the Boston Globe.

But Healey is vowing to continue the push to regulate student loan servicers if the federal government won’t.

“Secretary DeVos can write as many love letters to the loan servicers as she wants,” Healey said in a statement to the Boston Globe. “The last thing we need is to give this industry a pass while millions of students cannot afford to pay their loans.”

For now, involved states are likely to continue enforcing their own rules and requiring servicers to register according to state law — and wait for the courts to sort it out.


Original report: Once again, the Department of Education, headed by Secretary of Education Betsy DeVos, plans to take aim at policies put in place during President Obama’s administration. This time, reports Bloomberg, a forthcoming proposal could block states from regulating student loan debt collectors.

“This thing has been rumored for a while, but in recent days it’s looked like it might actually be released,” said Whitney Barkley-Denney, a policy counsel with the Center for Responsible Lending, a nonprofit research and policy organization committed to fighting predatory lending.

In recent years, some states — including Connecticut and Oklahoma — have enacted laws that tighten rules about the way companies seeking to collect on student loan debt interact with borrowers. The Department of Education is considering the release of a statement claiming federal law doesn’t allow states to regulate companies that act on its behalf.

Forbidding state regulation of student loan servicers

When President Trump entered office, he gave a mandate to government agencies to roll back regulations. The Department of Education rolled back several Obama-era rules in 2017, but this new move wouldn’t change federal regulations.

Instead, the proposed statement would prohibit states from imposing their own, stricter rules on student loan servicers. “The department believes such regulation is preempted by federal law,” according to Bloomberg’s reporting on the draft of a Federal Register notice that has yet to be filed by the Department of Education.

Bloomberg reports that the Education Department worries servicers would face increased costs as a result of state rules, and pass the costs on to the government — and eventually cost taxpayers more.

The move comes after industry groups related to the student loan industry called for restrictions on state probes into servicer practices.

In one letter sent to Betsy DeVos in June 2017, Debra J. Chromy, the President of the Education Finance Council (EFC) wrote, “EFC urges the Education Department (the Department) to publicly state that the entities with which it contracts to service student loans are governed by the Department’s rules and regulations, and that the Department’s rules hold preeminence in regulating the activities of their contractors.”

The EFC letter went on to say that servicers are already heavily regulated and state regulations wouldn’t provide any benefit to borrowers while being burdensome to student loan servicers.

States and consumer advocates fight back

Back in October, 25 state attorneys general, including some Republicans, sent their own letter to Betsy DeVos, asking her to not give into industry pressure.

“These requests defy the well-established role of states in protecting their residents from fraudulent and abusive practices, plainly exceed the scope of the Department’s lawful administrative authority, and would needlessly harm the students and borrowers at the core of the Department’s mission,” according to the letter.

Consumer advocates like student loan lawyer Jay Fleischman are concerned about what might happen if the Education Department stakes out this position.

“The effect is problematic because when you look at the overall position of the Department of Education, you see a body that is bent on rolling back any protections at all,” Fleischman said. “The federal government under President Trump has shown it’s unwilling to protect consumers and when you forbid the states from protecting them, there’s nowhere left for them to turn.”

Fleischman also cited the recent attacks on the Consumer Financial Protection Bureau (CFPB), including the appointment of Mick Mulvaney, an outspoken critic of the agency, to replace former head Richard Cordray, who was known for getting tough on student loan servicers.

“With the CFPB effectively de-clawed against the student loan servicing industry, the states are borrowers’ last line of defense against big companies using deceptive and unscrupulous practices,” Fleischman said.

Barkley-Denney doesn’t think the statement — if it is released — will hold up in court.

“I don’t believe that it will result in an end to state protections,” she said. “The attorneys general of involved states have a good litigation strategy.”

What she’s more concerned about is the impact on more state laws to protect borrowers. “I think the biggest concern is that this is going to confuse the landscape over what states are allowed to do,” Barkley-Denney said. “There’s a lot of forward momentum among state lawmakers who listen to their constituents to protect student loan borrowers, and this will confuse things.”

What student loan borrowers can do to protect themselves

“The Education Department is less concerned with protecting borrowers and taxpayers than helping servicers,” said Barkley-Denney. “We’ve been relying on states to fill the gap, and borrowers need to know what’s going on as well.”

The first step to protecting yourself is understanding the situation. Barkley-Denney said that it’s not just about big, well-known student loan servicers such as Navient and Nelnet. Smaller state guarantee agencies are also part of industry lobbying groups like the National Council of Higher Education Resources (NCHER), another group Bloomberg reports has asked the Department of Education to block states’ ability to regulate federal loan servicers.

“These state guarantee agencies are acting as servicers and working to overturn their own state laws,” said Barkley-Denney.

Contact your local state legislative representatives to let them know where you stand on legislation designed to protect borrowers. You can find information about your state and local representatives at USA.gov.

At the national level, you can track legislation related to student loans and higher education by using Student Loan Hero’s bill tracker.

On top of that, check with the National Student Loan Data System (NSLDS) to find out how much you owe and who your servicers are. Make sure you understand your repayment options and the protections you are entitled to.

For now, the Department of Education statement may never come out. However, student loan servicing groups continue to push Betsy DeVos to rein in state regulations, so it’s a possibility that’s increasingly likely.

“If it comes to pass, states shouldn’t take it lying down,” said Barkley-Denney. “We hope state attorneys general would fight it on behalf their borrowers and citizens.”

Interested in refinancing student loans?

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1 Important Disclosures for Earnest.

Earnest Disclosures

To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.

Earnest fixed rate loan rates range from 3.45% APR (with Auto Pay) to 7.49% APR (with Auto Pay). Variable rate loan rates range from 2.14% APR (with Auto Pay) to 6.79% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of September 6, 2019, and are subject to change based on market conditions and borrower eligibility.

Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.

The information provided on this page is updated as of 09/06/2019. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at hello@earnest.com, or call 888-601-2801 for more information on our student loan refinance product.

© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.


2 Important Disclosures for SoFi.

SoFi Disclosures

  1. Student loan Refinance: Fixed rates from 3.49% APR to 7.94% APR (with AutoPay). Variable rates from 2.14% APR to 7.84% APR (with AutoPay). Interest rates on variable rate loans are capped at either 8.95% or 9.95% depending on term of loan. See APR examples and terms. Lowest variable rate of 2.14% APR assumes current 1 month LIBOR rate of 2.14% minus 0.15% margin minus 0.25% ACH discount. Not all borrowers receive the lowest rate. If approved for a loan, the fixed or variable interest rate offered will depend on your creditworthiness, and the term of the loan and other factors, and will be within the ranges of rates listed above. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. See eligibility details. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. *To check the rates and terms you qualify for, SoFi conducts a soft credit inquiry. Unlike hard credit inquiries, soft credit inquiries (or soft credit pulls) do not impact your credit score. Soft credit inquiries allow SoFi to show you what rates and terms SoFi can offer you up front. After seeing your rates, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit inquiry. Hard credit inquiries (or hard credit pulls) are required for SoFi to be able to issue you a loan. In addition to requiring your explicit permission, these credit pulls may impact your credit score.  
  2. Terms and Conditions Apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi’s underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Financing Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (www.nmlsconsumeraccess.org)

3 Important Disclosures for Laurel Road.

Laurel Road Disclosures

FIXED APR
Fixed rate options consist of a range from 3.50% per year to 5.55% per year for a 5-year term, 4.00% per year to 6.00% per year for a 7-year term, 4.30% per year to 6.40% per year for a 10-year term, 4.60% per year to 6.80% per year for a 15-year term, or 5.05% per year to 7.02% per year for a 20-year term, with no origination fees. The fixed interest rate will apply until the loan is paid in full (whether before or after default, and whether before or after the scheduled maturity date of the loan). The monthly payment for a sample $10,000 loan at a range of 3.50% per year to 5.55% per year for a 5-year term would be from $184.00 to $193.00. The monthly payment for a sample $10,000 loan at a range of 4.00% per year to 6.00% per year for a 7-year term would be from $138 to $148. The monthly payment for a sample $10,000 loan at a range of 4.30% per year to 6.40% per year for a 10-year term would be from $104 to $115. The monthly payment for a sample $10,000 loan at a range of 4.60% per year to 6.80% per year for a 15-year term would be from $79 to $91. The monthly payment for a sample $10,000 loan at a range of 5.05% per year to 7.02% per year for a 20-year term would be from $68 to $80.

However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the fixed rate will decrease by 0.25%, and will increase back up to the regular fixed interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.

VARIABLE APR
Variable rate options consist of a range from 2.43% per year to 6.05% per year for a 5-year term, 3.75% per year to 6.10% per year for a 7-year term, 4.00% per year to 6.15% per year for a 10-year term, 4.25% per year to 6.40% per year for a 15-year term, or 4.50% per year to 6.65% per year for a 20-year term, with no origination fees. APR is subject to increase after consummation. The variable interest rate will change on the first day of every month (“Change Date”) if the Current Index changes. The variable interest rates are based on a Current Index, which is the 1-month London Interbank Offered Rate (LIBOR) (currency in US dollars), as published on The Wall Street Journal’s website. The variable interest rates and Annual Percentage Rate (APR) will increase or decrease when the 1-month LIBOR index changes. The variable interest rates are calculated by adding a margin ranging from 0.25% to 3.80% for the 5-year term loan, 1.50% to 3.85% for the 7-year term loan, 1.75% to 3.90% for the 10-year term loan, 2.00% to 4.15% for the 15-year term loan, and 2.25% to 4.40% for the 20-year term loan, respectively, to the 1-month LIBOR index published on the 25th day of each month immediately preceding each “Change Date,” as defined above, rounded to two decimal places, with no origination fees. If the 25th day of the month is not a business day or is a US federal holiday, the reference date will be the most recent date preceding the 25th day of the month that is a business day. The monthly payment for a sample $10,000 loan at a range of 2.43% per year to 6.05% per year for a 5-year term would be from $179 to $195. The monthly payment for a sample $10,000 loan at a range of 3.75% per year to 6.10% per year for a 7-year term would be from $137 to $148. The monthly payment for a sample $10,000 loan at a range of 4.00% per year to 6.15% per year for a 10-year term would be from $103 to $114. The monthly payment for a sample $10,000 loan at a range of 4.25% per year to 6.40% per year for a 15-year term would be from $77 to $88. The monthly payment for a sample $10,000 loan at a range of 4.50% per year to 6.65% per year for a 20-year term would be from $65 to $77.

However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.

All credit products are subject to credit approval.

Laurel Road began originating student loans in 2013 and has since helped thousands of professionals with undergraduate and postgraduate degrees consolidate and refinance more than $4 billion in federal and private school loans. Laurel Road also offers a suite of online graduate school loan products and personal loans that help simplify lending through customized technology and personalized service. In April 2019, Laurel Road was acquired by KeyBank, one of the nation’s largest bank-based financial services companies. Laurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. All loans are provided by KeyBank National Association, a nationally chartered bank. Member FDIC. For more information, visit www.laurelroad.com.


4 Important Disclosures for Splash Financial.

Splash Financial Disclosures

Terms and Conditions apply. Splash reserves the right to modify or discontinue products and benefits at any time without notice. Rates and terms are also subject to change at any time without notice. Offers are subject to credit approval. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet applicable underwriting requirements. Not all borrowers receive the lowest rate. Lowest rates are reserved for the highest qualified borrowers.


5 Important Disclosures for CommonBond.

CommonBond Disclosures

Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 2.19% effective August 10, 2019.


6 Important Disclosures for LendKey.

LendKey Disclosures

Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.


7 Important Disclosures for College Ave.

College Ave Disclosures

College Ave Student Loans products are made available through either Firstrust Bank, member FDIC or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.

1College Ave Refi Education loans are not currently available to residents of Maine.

2All rates shown include autopay discount. The 0.25% auto-pay interest rate reduction applies as long as a valid bank account is designated for required monthly payments. Variable rates may increase after consummation.

3$5,000 is the minimum requirement to refinance. The maximum loan amount is $300,000 for those with medical, dental, pharmacy or veterinary doctorate degrees, and $150,000 for all other undergraduate or graduate degrees.

4This informational repayment example uses typical loan terms for a refi borrower with a Full Principal & Interest Repayment and a 10-year repayment term, has a $40,000 loan and a 5.5% Annual Percentage Rate (“APR”): 120 monthly payments of $434.11 while in the repayment period, for a total amount of payments of $52,092.61. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary.

Information advertised valid as of 08/01/2019. Variable interest rates may increase after consummation.

2.14% – 6.79%1Undergrad
& Graduate

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2.14% – 7.84%2Undergrad
& Graduate

Visit SoFi

2.43% – 6.65%3Undergrad
& Graduate

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2.43% – 7.60%4Undergrad
& Graduate

Visit Splash

2.14% – 8.01%5Undergrad
& Graduate

Visit CommonBond

2.06% – 8.93%6Undergrad
& Graduate

Visit Lendkey

2.74% – 7.24%7Undergrad
& Graduate

Visit College Ave

Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print to help you understand what you are buying. Be sure to consult with a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time.

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