Creating a student loan bill of rights

UC Berkeley graduation 2010. Image via Flickr (CC BY-NC-SA 2.0)

By Mikhail Zinshteyn

WHAT THE BILL WOULD DO

Its backers call it the strongest set of state consumer protections for student loan borrowers. AB 376, by Assemblymember Mark Stone, is a set of rules for student loan servicers — the companies that manage federal and private student loan debt. The long list includes rules like telling borrowers about programs that could lower their monthly payments and have their loans forgiven, alerting veterans to additional relief, and minimizing late fees for partial payments. Importantly, the bill opens up the loan servicers to lawsuits from consumers if the servicers don’t follow through on the bill’s expectations, which include retraining staff and greater transparency about the payment histories of borrowers. The bill also creates a state student loan ombudsman to track borrower complaints, assuming lawmakers and the governor approve a budget for that office’s staff.

WHO SUPPORTS IT?

More than 70 student-debt advocacy groups, unions and trade groups. Those include the California Federation of Teachers, California Dental Association, Consumer Reports and AARP. California’s Attorney General Xavier Becerra and Lt. Gov. Eleni Kounalakis also support it.

WHO’S OPPOSED?

Banking and loan servicing companies. The national trade group for student loan servicers say the bill exposes the companies to unwarranted lawsuits. The Consumer Bankers Association and California Bankers Association dislike that its members will have to follow the bill’s rules and want to be excluded from the regulations.

WHY IT MATTERS

Borrowers have long complained that loan servicers give bad or misleading advice, resulting in them having to pay more and longer for loans. This bill would change that.

GOVERNOR’S CALL:

Newsom signed the bill into law on Sept. 25.