50 Organizations Call For Student Loan “Bill Of Rights”

Over 50 state & national civil rights, higher education, & consumer advocacy organizations, including the heads of state universities and community colleges, are calling on the Massachusetts state legislature to pass a student loan borrower “bill of rights.”

Massachusetts is the latest state considering a legislative measure to codify legal protections for student loan borrowers. California’s state legislature has taken up a similar measure this month, as well. And several other states — including Illinois, Connecticut, and Washington — have already enacted a bill of rights for student loan borrowers. The concept of a unique set of consumer protection laws geared entirely towards people with student debt is gaining traction across the country, and advocates hope that this patchwork of state laws can be the impetus for uniform, nationwide, federally-mandated consumer protections.

“Even before the current COVID-19 pandemic, student loan borrowers struggled with a predatory student loan servicing industry that knowingly misleads borrowers to increase its profits,” the coalition of organizations wrote in a letter to the Massachusetts state legislature. “With the increased financial instability brought by the present pandemic-induced economic crisis, it is more important than ever that borrowers know their rights, [and] are protected by strong consumer guidelines... In tumultuous times, taking action to defend students defrauded or deceived by student loan companies is more critical than ever.”

Student loan servicing is widely viewed as problematic. Multiple state attorneys general have brought lawsuits against major federal student loan servicers alleging widespread misconduct. A new report released this month confirmed that student loan servicers continue to have substantial problems administering federal loan programs such as Public Service Loan Forgiveness. And even the U.S. Department of Education’s own inspector general found significant problems with student loan servicing, including a lack of appropriate oversight by the federal government. 

The proposed Student Loan Borrower Bill of Rights in Massachusetts (referred to as H.3977 in the state house of representatives, and S.2874 in the state senate version), would do the following:

  • Ban abusive or deceptive student loan servicing practices, such as wrongfully steering borrowers into forbearances and away from relief programs like income-driven repayment or Public Service Loan Forgiveness, and providing recourse for borrowers harmed by these practices. 
  • Codify minimum servicing standards for companies that handle student loan accounts.
  • Establish a Student Borrower Ombudsman responsible for reviewing and acting on complaints submitted by borrowers.
  • Provide public education initiatives to help students and borrowers navigate student loan repayment and default issues. 

Critics of state-based “bills of rights” for student loan borrowers question the ability and authority of states to regulate student loan servicers who are often contracted with the federal government, citing supremacy of federal law over state law. However, several recent court decisions have affirmed the ability of states to regulate federal student loan servicers under state consumer protection statutes.

Signatories on the letter to the Massachusetts legislature in support of the bill include the Student Loan Borrower Protection Center, the Massachusetts Teacher’s Association, Veterans Education Success, and Consumer Reports, as well as the heads of the University of Massachusetts and local community colleges. 

The bill is currently in a conference committee, and the letter urges the committee to release the bill favorably to proceed towards passage.

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