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Federal Register / Vol. 86, No. 153 / Thursday, August 12, 2021 / Rules and Regulations
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responsible bidders for Federal contracts would be frustrated by giving the States licensing board a virtual power of review over the federal determination about selecting its own contractors. Id. at 190.
Two recent Federal court decisions have concluded that this wellestablished precedent applies to a States refusal to license Federal student loan servicers. In Student Loan Servicing Alliance, the Court concluded that the District of Columbias licensing scheme was preempted because it would bar Federal student loan contractors from working within the District. See 351 F. Supp. 3d at 6172, 7576. Similarly, in Pennsylvania Higher Education Assistance Agency v.
Perez, 457 F. Supp. 3d 112, 12225 D.
Conn. 2020, the Court concluded that the States authority to grant or withhold a license to a Federal student loan servicer was preempted because it could disqualify Federal student loan contractors from operating within the State.
E. Direct Loan Program and Preemption The Direct Loan program, which was created as part of the Student Loan Reform Act of 1993 Pub. L. 10366, poses some specific statutory and regulatory issues of preemption. In this program, the Federal government makes loans directly to the borrower and is responsible for all aspects of the loan from origination through repayment, including servicing and collection.
Congress also provided that the Department could use contractors to service the loans and for any other purposes deemed necessary to ensure the successful operation of the program. 20 U.S.C. 1087fb4. When procuring such services, the Department must comply with all applicable Federal laws and regulations and design its program so that the loan servicing is provided at competitive prices. 20
U.S.C. 1087fa1. And the Department specifies in some detail the responsibilities and obligations of the servicers for Direct Loans. 2018
interpretation, 83 FR 10620.
The 2018 interpretation observed that in some instances, these provisions would operate to preempt State requirements that directly conflicted with requirements imposed under Federal law. For example, as discussed above, an attempt by a State to revoke a license granted by the Federal government for purposes established under Federal law would be invalid.
Leslie Miller, 352 U.S. at 190. Yet this does not imply that a State cannot act to impose reasonable, generally applicable conditions on entities
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including Federally licensed contractors operating within the bounds of the State, as authorized under its police powers exercised on behalf of its citizens. See, e.g., California Coastal Commn v. Granite Rock Co., 480 U.S.
572 1987 Rather than evidencing an intent to preempt such state regulation, the Forest Service regulations appear to assume compliance with state laws..
Where the States impose conduct requirements prohibiting affirmative misrepresentations by student loan servicers, those measures are not preempted by general disclosure requirements in Federal law. See, e.g., Cipollone, 505 U.S. at 529 State-law prohibitions on false statements of material fact do not create diverse, nonuniform, and confusing standards.. Notably, the courts have repudiated the expansive approach taken in the 2018 interpretation, which was premised on the claim that the purpose of the Direct Loan program was to establish a uniform, streamlined, and simplified lending program managed at the Federal level. 83 FR
10621. See, e.g., Navient, 967 F.3d at 293 finding no legislative support for uniformity here; Lawson-Ross, 955 F.3d at 92122 same; Nelson, 928 F.3d at 651 same; College Loan Corp. v. SLM
Corp., 396 F.3d 588, 597 4th Cir. 2005
same. Indeed, it is telling that Congresss own stated purposes in the HEA itself make no mention of uniformity, see Lawson-Ross, 955 F.3d at 921, and the Supreme Court has held that courts are not to infer preemption merely from the comprehensive nature of Federal regulation. See New York State Dept of Social Servs. v. Dublino, 413 U.S. 405, 415 1973.
The cases rejecting the claims made in the 2018 interpretation about the need for uniformity also point out that even if we assume that uniformity is a purpose of the HEA, claims about affirmative misrepresentations by loan servicers would not conflict with that purpose. Lawson-Ross, 955 F.3d at 92223. Even such uniformity as does exist in the program is not harmed by prohibiting unfair or deceptive conduct in the operation of the program that is not explicitly permitted by the HEA.
Pennsylvania v. Navient Corp., 354 F.
Supp. 3d 529, 553 M.D. Pa. 2018, affd, 967 F.3d 273 3d Cir. 2020. For similar reasons, the arguments in the 2018
interpretation that accompany the arguments for uniformity, which relate to reducing costs and treating borrowers equitably while not confusing them, see 83 FR 1062021, are likewise unavailing. Reducing costs by making fraudulent or false statements to student loan borrowers is indefensible as a
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tactic; and allowing such misconduct to be perpetrated on a mass scale would neither foster equitable treatment for borrowers nor spare them any confusion. In addition, relieving Federal contractors of any exposure to liability for fraud or false statements would save them money, to be sure, but it would be a breathtakingly broad assertion of preemption, given that even Federal contractors are routinely subject to liability for violating State tort laws.
F. FFEL Program Loans and Preemption As with the Direct Loan program, the FFEL program poses some specific statutory and regulatory issues of preemption. The general treatment of these issues runs parallel to the discussion for Direct Loans, in that some specific Federal laws and regulations preempt State laws that conflict squarely on matters such as timelines, dispute resolution procedures, and some particulars of debt collection and loan servicing. But here, too, the grounds for preemption of State laws are narrow and do not properly include any preemption of liability under State law for other matters, such as affirmative misrepresentations made to loan borrowers.
In the past, the Department has identified specific types of State laws that are preempted because they would frustrate the operation and purposes of the Federal student loan programs. On October 1, 1990, for instance, the Department issued a notice interpreting its regulations governing the FFEL
Program then known as the Guaranteed Student Loan program, which require guaranty agencies and lenders to take certain actions to collect FFEL Program loans. The Departments position in that interpretive notice was that the regulations requiring those activities preempt State laws regarding those very same activities. See 55 FR 40120. More specifically, the Department explained that its regulations establish minimum collection actions required on all FFEL
obligations, which preempted contrary or inconsistent State laws that would prevent compliance with the Federal regulations. See id. at 40,121. These regulations for the FFEL Program are now codified at 34 CFR 682.410b8
and o.
The 2018 interpretation describes some State laws as inconsistent with specific Federal measures. These include laws creating deadlines for servicers to respond to borrower inquiries or disputes; deadlines for notifying borrowers of loan transfers between servicers; requirements for dispute resolution procedures; and a
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