Low-temperature plasma (LTP) oxidation has been widely used to study the mineralogy of the mineral matter existing in coal sources. The current study investigated the potential of LTP oxidation as a pre-treatment method to improve rare earth element (REE) leachability from coal and its by-products. Representative density-fractionated samples of Baker and Fire Clay coarse refuse seam materials were ground to a top size of 180 µm and subjected to low-temperature plasma oxidation. Subsequently, the treated samples were leached at 1% w/v solids concentration and 75 °C for 5 h using (i) de-ionized (DI) water, (ii) 0.1 mol/L of ammonium sulfate, and (iii) 1.2 mol/L of sulfuric acid. It was determined that LTP treatment improved REE leaching characteristics, especially the leaching of heavy REEs (HREE), existing in the lighter density fractions of the Baker seam coarse refuse material. For instance, the HREE recovery for the 1.6 specific gravity (SG) float fraction increased from 8% to 33% using 0.1 mol/L of ammonium sulfate solution after 32 h of LTP treatment. This finding indicated that HREEs associated with the organic matter were released by the LTP treatment and adsorbed onto the surfaces of highly negative charged mineral matter and was exchanged with ammonium to allow their recovery. Similarly, when using 1.2 mol/L of sulfuric acid, the HREE recovery increased from 23% to 53% for the 1.6 SG float fraction. Interestingly, LTP oxidation did not provide significant improvement in REE recovery from the 2.2 sink density fractions, which was likely due to its lower organic content. No significant benefits were observed when treating the Fire Clay coarse refuse material, which was likely due to the lack of organic affinity and the difficult-to-leach REE minerals associated with the coal source such as monazite, xenotime, and zircon. Conversely, high-temperature oxidation within a temperature range of 600–750 °C significantly improved REE leaching characteristics for both coal sources. Improvement in REE recovery was due to decarbonization of the material, clay dehydroxylation and subsequent conversion of liberated REE-bearing minerals into a more leachable form. However, increasing the temperature above 800 °C decreased REE recovery due to the conversion of meta-kaolinite into mullite, which is chemically stable.