Sixteen state attorneys general led by New York Attorney General Barbara Underwood are siding with the District of Columbia in a lawsuit brought by the Student Loan Servicing Alliance.
The loan servicing alliance is opposing a district law that regulates loan servicers, arguing that its enforcement is preempted by federal law, a position also supported by the U.S. Department of Justice, which filed a “statement of interest” in the case.
The filing by state attorneys general in an amicus brief to the U.S. District Court in D.C. is the latest in a series of legal moves, including lawsuits, opposing federal policies that weaken protections for student loan borrowers.
State attorneys general have opposed the Department of Education’s failure to implement the Gainful Employment Rule, which targets for-profit colleges whose graduates have a heavy load of student debt, and its proposed changes to the DOE’s borrower defense regulations, which let student loan borrowers defrauded by their school discharge their loans.
In their court brief, the coalition of state attorneys general note that the federal government’s position in the latest lawsuit “represents a sharp departure from its longstanding view that the states play an important role in regulating student loan services.”
Until 2017, federal contracts with loan servicing companies typically required that loan servicers comply with federal and state laws and regulations, according to the brief and federal and state agencies agreed to continue sharing information about loan servicing issues.