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Now that the U.S. Department of Education has said that state efforts to stop unfair and deceptive actions by federal student loan servicers are pre-empted by weaker federal law, student loan borrowers who have been misled by the financial firms servicing their student loans have lost access to strong consumer protections in the states. The Education Department's interpretation clears the path for predatory lenders and institutions to continue taking advantage of students seeking higher education.
If carried out, the Department’s misguided guidance will give free rein to bad actors that have taken advantage of students. The Consumer Financial Protection Bureau has received over 60,000 complaints from students over misinformation and mistakes in their loan servicing.
In response to borrower complaints, states have enacted strong protections for student borrowers - from the recently passed SOAR Act, a student loan bill of rights in Washington, to suits filed by the Massachusetts Attorney General against loan servicers that have driven up costs for students.
In short, the federal Higher Education Act does not and should not override state law that grants additional protections to student borrowers.
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