We Might See a Government Showdown About Student Loans

As if student loans weren't enough of a stress-bomb by themselves, the federal government may be about to face off with the states about who gets to make the rules we follow. The U.S. Department of Education has pre-released a memo which seeks to "clarify further the federal interests" in whether state policies overrule national ones when it comes to regulatory requirements for loan servicers. TL;DR: College students and grads are going to get caught in the middle.

California attorney general Xavier Becerra said in a statement Friday that "Education Secretary Betsy DeVos is attempting to exempt private contractors that service federal student loans from complying with state law." Here's the backstory: First, states complained that federal student loan laws didn't do enough to protect the students borrowing in the first place. With American student debt hovering near $1.4 trillion, the states argued, students need all the help they can get. The loan servers, on the other hand, were dissatisfied that states required licenses and abided by different sets of laws (a "regulatory maze," one trade group leader proclaimed).

Now, after lobbying from student loan companies, the Department of Education is arguing that federal law preempts state law, which would render the individual state protections for borrowers toothless. Basically, get ready for a fight between stalwarts of the present administration and defenders of precedents set by the previous. A memo isn't a law or even a bill, but it is a signal about government priorities. If you have feelings about the issue one way or another, it's never too early to let your elected representatives know.