Legislation Will Reform Disclosure and Servicing Standards for Both Federal and Private Student Loans
WASHINGTON, DC–(ENEWSPF)–U.S. Senator Dick Durbin (D-IL) was joined by U.S. Senators Elizabeth Warren (D-MA), Barbara Boxer (D-CA), and Jack Reed (D-RI) yesterday in introducing legislation to ensure struggling student loan borrowers are treated fairly and understand the full range of repayment options and resources available to them.
“Student loan debt has tripled over the last decade,” Durbin said. “With student loan debt far outpacing the rise in starting salaries, many borrowers find that despite their best efforts, they are unable to make their monthly payments. And when lenders refuse to work with them on a repayment plan, they begin a downward spiral that is difficult to turn around. These borrowers and their families should not have to face the burden of additional costs because they cannot resolve errors quickly or gain access to programs meant to help them. The Student Loan Borrower Bill of Rights will ensure that all borrowers will have access to basic rights and protections.”
“Our students now face more than $1 trillion in student loan debt, but many young people are asked to pay even more in costs because of unfair treatment by loan servicers. We should be supporting students who have worked hard to get an education, not making it more difficult for them. I’m pleased to join Senators Durbin, Boxer, and Reed to introduce the Student Loan Bill of Rights, which will help make sure student borrowers are treated fairly and have access to the information and resources they need,” Warren said.
“Student borrowers must be treated fairly,” Boxer said. “The Student Loan Borrower Bill of Rights would ensure that students are provided clear and honest information about how much they owe and what their repayment options are.”
“If we’re going to make a dent in making college affordable, we have to hold servicers accountable, increase transparency, and ensure students and their families get a fair deal. The Student Loan Borrower Bill of Rights will help establish clear, measurable expectations for servicers and ensure borrowers have access to the information they need to make informed decisions about repaying their student loans,” said Reed.
The Consumer Financial Protection Bureau (CFPB) has released two reports over the last two years that have revealed that servicing standards are in need of reform to ensure borrowers are informed and can access basic information about their loans. The CFPB’s 20103 report is available here and the 2012 report is available here. Though many students hold federal student loans with strong consumer protections, a growing number take out private loans that carry no limits on interest rates and offer few, if any, alternative repayment plans. In some cases, even federal student loan borrowers are unaware of options like income-based repayment and public service loan forgiveness. Payments are sometimes misallocated to loans with lower interest rates, preventing borrowers from paying loans off quickly, and borrowers report significant challenges in resolving errors on their accounts in a timely manner.
Durbin’s bill provides six basic rights for all federal and private student loan borrowers:
The right to have options such as alternative payment plans to avoid default.
The right to be informed about key terms and conditions of the loan and any repayment options to ensure changing plans won’t cost more.
The right to know your loan’s servicer and who to reach out to when there is a problem.
The right to consistency when it comes to how monthly payments are applied. Lenders and servicers should also honor promotions and promises that are advertised or offered.
The right to fairness, like grace periods when loans are transferred or debt cancellation when the borrower dies or becomes disabled.
The right to accountability, including timely resolution of errors and certification of private loans.
The bill places a special focus on servicemember and veteran borrowers by requiring loan servicers to provide each borrower with a liaison specifically trained in the benefits available to military borrowers.