Legislation in the state Senate would make California the first state in the nation to establish basic consumer protections for student loan borrowers.
By Samantha Seng and
Samantha Seng is policy advisor for Next Gen Policy, email@example.com.
Cody Hounanian, Special to CalMatters
Cody Hounanian is program director for Student Debt Crisis, firstname.lastname@example.org.
August typically marks the start of students heading to campus for fall classes at our state’s colleges and universities. As we all know, though – this is no typical year.
Fall classes are increasingly remote-only and many campus reopenings remain uncertain. In the midst of all this uncertainty, however, one thing remains constant: once again, too many California students will be victimized by predatory lending practices and overburdened by student loan debt.
Almost 4 million Californians currently owe more than $147 billion in student loans. Many of these loans were made without the students having sufficient information about the debt load they were undertaking. Other loans are exacerbated by egregious practices such as pushing students from certain neighborhoods into more expensive repayment plans or loans with higher interest rates.
Now, given the current economic instability, many Californians are unable to make student loans, mortgages and rent payments. And the decrease in unemployment benefits and other pandemic related financial impacts are having a cumulative effect on student loan borrowers. More than 508,000 Californians are in default on their student loans, $14 billion worth. And every day more California students find their way into this trap.
The legislation, if passed, would make California the first state in the nation to establish basic consumer protections for student loan borrowers. AB 376 creates the Student Borrower Bill of Rights.
Under the Student Borrower Bill of Rights, borrowers will receive reliable information, quality customer service and meaningful access to loan repayment and forgiveness programs. AB 376 also establishes an important new advocate for student borrowers, the Student Borrower Ombudsman Advocate. Further, it helps set standards, monitor practices and empowers student borrowers to enforce these rights when facing bad actors in the student loan industry.
The consumer protections contained in the bill will help a wide range of Californians. Rural communities as well as urban ones are home to student borrowers burdened by debt. Students of color and women are more likely to have to take on loans. Older Californians are increasingly burdened by the student debt they still carry. Veterans, often the targets of for-profit colleges, have also been victims of predatory lending practices. And nationally, more than 200,000 active duty servicemembers hold more than $2.9 billion in outstanding student loans.
These are just some of the reasons why a diverse coalition of more than 70 education experts, community organizations, civil rights groups and consumer advocates support the bill. To be successful, though, they have to overcome a push by the big banks and student loan servicers who want more profit and less oversight.
Despite the bill’s swift passing through the California Assembly last year, time is running out to pass it in the Senate. The Legislature adjourns for the year on Aug. 31. While the end of the month is the final legislative deadline, individual action can be taken now. That’s why it’s important for students and their families, along with everyone who wants a sustainable and equitable economic recovery, to contact their state senator as soon as possible urging them to support this groundbreaking legislation.
Typically, many students and their families would be filling stores about now, looking for back-to-school bargains for students entering and returning to college. The plain truth is, the credit card transactions for any of their purchases receive greater scrutiny and offer more consumer protections than the student loans for the college education they are about to receive. AB 376 will protect borrowers – if we act in time.