Continuing state action will hasten fair practices across the industry
DURHAM, N.C. – A new wave of state legislation passed in 2019 continues the trend of states addressing abuses in the student loan servicing industry, according to a report by the Center for Responsible Lending (CRL) titled, Stepping Up: States Move to Hold Student Loan Servicers Accountable. The analysis notes that, since 2015, thirteen states have passed reforms to address the practices of companies that provide the crucial link between student borrowers and successful repayment of their loans. Those states include Colorado, New Jersey, and Maine, where strong reforms passed with bipartisan support.
The U.S. Department of Education has failed to implement reforms and improve standards to address the poor practices of student loan servicers such as Navient and FedLoan Servicing. Servicers have put student borrowers in consecutive forbearances instead of affordable income-driven repayment plans. This and other unfair practices add to the nation’s student debt burden, which has increased by $675 billion in the past decade.
Once the legislation passed in the latest round of states in 2019 takes effect, citizens will have a level of protection in states that are carrying nearly 30% of the nation’s $1.5 trillion student debt burden.
"Higher education is meant to give people a means of pursuing their dreams and creating financial security for their families,” said CRL Policy Counsel Yasmin Farahi, who co-authored the report. “But those who must borrow more because they have fewer family and generational resources too often find financial prosperity out of reach even after working hard to earn that college degree. Poor servicing compounds the burden of student loan debt and makes it less likely that borrowers will successfully pay off their loans while being able to build a future for themselves and their families."
"As the U.S. Department of Education continues to stand with companies that have very poor standards of service and fails to protect student borrowers from harmful practices, it is ever more important for states to step up and assert their own right and responsibility to establish oversight," said CRL Senior Policy Counsel Whitney Barkley-Denney, who co-authored the report. “These pioneering states have shown what’s possible, and we look forward to major reform in student loan servicing practices prompted by more states following suit."
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Press Contact: carol.parish@responsiblelending.org