In Chae v. SLM Corporation593 F.3d 936 (9th Cir. 2010), the U.S. Court of Appeals for the Ninth Circuit held that the federal Higher Education Act preempts student borrowers’  claims that Sallie Mae, Inc.’s interest rates, late fees, and payment schedules violate California law.

In conclusion, the Plaintiffs’ allegations that Sallie Mae makes fraudulent misrepresentations in its billing statements and coupon books are expressly preempted by the HEA, and conflict preemption prohibits the Plaintiffs from bringing their remaining claims because, if successful, they would create an obstacle to the achievement of congressional purposes. Having carefully considered the FFELP and the purposes of Congress in the HEA, we conclude, beyond any doubt, that subjecting the federal regulatory standards to the potentially conflicting standards of fifty states on contract and consumer protection principles would stand as a severe obstacle to the effective promotion of the funding of student loans. Such an obstacle, which we consider hostile to the purposes of Congress in this program, must bow to the overriding principles of conflict preemption and federal law supremacy.