Legal Seminar, Denver, CO

Student Loan Servicing: Preemption Notice • The Notice asserts that state regulation and licensing of entities servicing student loans originated through the Direct Loan Program or the FFEL Program is preempted.

– Asserts field preemption with respect to state regulation of Direct Loan servicing

– Asserts conflict preemption and obstacle preemption with respect to state regulation of FFELP Loan servicing and Direct Loan servicing

– Asserts express preemption with respect to prohibitions on misrepresentation or the omission of material information by federal student loan servicers.

For Discussion Purposes Only

Student Loan Servicing: Field Preemption • The Notice asserts what amounts to field preemption of state servicing laws on two grounds: – (1) Direct Loan servicing contracts implicate “a uniquely federal interest” that is impeded by state licensing and regulation of Direct Loan servicers; and – (2) state licensure of Direct Loan servicers interferes with the ED’s determination as to whether servicers are qualified to contract with ED. • These claims amount to field preemption because they would entail the categorical preclusion of state regulation of Direct Loan servicers without any conflict or interference with federal law.

• Both claims fly in the face of unanimous opinion among the federal courts that field preemption does not apply under the HEA.

Confidential / Sensitive / Pre-Decisional – For Discussion Purposes Only