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Is a student loan bill of rights coming to California?
Here’s what you need to know.
Student Borrower Bill of Rights
On Tuesday, the California Assembly passed a first-in-the-nation “Student Borrower Bill of Rights,” which aims to protect borrowers with student loans. Sponsored by Assemblyman Mark Stone, the bill, AB 376, primarily targets student loan servicers, which are responsible for collecting student loan payments and managing student loan accounts.
If the California Senate passes the bill before this September, California Governor Gavin Newsom could sign the legislation before year end.
“Multiple investigations have shown that loan servicers routinely lose paperwork, misapply payments, provide borrowers inaccurate information, and even steer them into more costly repayment options with virtually no accountability,” said Suzanne Martindale, senior policy counsel and western states legislative manager for Consumer Reports, which co-sponsored the legislation. “At a time when the U.S. Department of Education has refused to set loan servicing standards to help borrowers, it’s critical for states like California to lead the way and address these longstanding abuses.”
Student Loans: Protections
While student loan servicers cannot engage in unfair or deceptive business practices, the bill would set minimum industry standards for all student loan servicers, strengthen consumer protections and increase oversight.
Specifically, the bill would:
- Ban “abusive” student loan servicing practices regarding student loan repayment;
- Create minimum loan servicing standards that ensure student loan payments are applied correctly, borrower’s student loan records are maintained accurately and student loan servicer staff members are trained to provide accurate information regarding student loan repayment options.
- Establish a Student Loan Advocate (similar to the student loan advocate role at the Consumer Financial Protection Bureau) to review borrower complaints and inform the state legislature; and
- Grant the Department of Business Oversight additional “market monitoring” authorities to aggregate data about the student loan servicing industry.
Latest Student Loan Debt Statistics
According to the latest student loan debt statistics, there are more than 44 million borrowers who collectively owe $1.5 trillion in student loan debt in the U.S. alone. Student loan debt is now the second highest consumer debt category – behind only mortgage debt – and higher than both credit cards and auto loans. Collectively, 3.7 million Californians hold an estimated $125 billion of student loan debt. More than 500,000 Californians currently are behind on their student loan payments.
Last year, California sued Navient, a leading student loan servicer, and alleged improper actions on behalf of student loan borrowers.
This followed action from the Consumer Financial Protection Bureau (CFPB), which sued Navient in January 2017 for allegedly “systematically and illegally [failing] borrowers at every stage of repayment,” including:
- created obstacles to repayment by providing bad information;
- processed payments incorrectly;
- failed to act when borrowers complained;
- illegally cheated many struggling borrowers out of their rights to lower payments, which caused them to overpay for their student loans;
- deceived private student loan borrowers about requirements to release their co-signer from the loan; and
- harmed the credit of disabled borrowers, including severely injured veterans
Navient has denied the allegations publicly and in court filings.
Student Loan Servicers: 4-Step Action Plan
While the California Senate considers next steps, here are four actions you can take when it comes to your student loans.
1. Know your student loan options
Rather than rely solely on your student loan servicer, do your homework and take control of your student loans:
2. Keep detailed records
Keep track of all your student loan payments and correspondence with your student loan servicer. For all important transactions and directives, it’s best to communicate in writing with your student loan servicer.
3. File a complaint
If you feel you have been wronged by your student loan lender or your student loan servicer, you can file a formal complaint with:
4. Pay Off Your Student Loans Faster in 2019
If you don’t like dealing with your student loan servicer, there are simple ways to pay off your student loans faster in 2019.
These free student loan calculators also can help you understand your student loan repayment options.
May 31, 2019 at 08:33AM
Forbes – Entrepreneurs