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Massachusetts on path to regulate student loan servicers

The Massachusetts Senate passed a bill on Wednesday that would monitor student loan companies and handle complaints. PHOTO BY BETSEY GOLDWASSER/DFP FILE PHOTO

The Massachusetts Senate passed a bill Wednesday that would give students a loan “bill of rights,” despite demands from President Donald Trump’s administration to not go forward with this type of legislation.  

The bill would oversee student loan companies, handle borrower complaints and mandate student loan servicers to acquire a license. The legislation, if passed, would implement an ombudsman, which is an official that would be appointed to investigate complaints.

According to the bill, an annual report would be submitted to the state legislature that would include the number of complaints received from student loan borrowers, the names of the servicers who caused complaints and recommendations to improve operations.

Charlotte Hancock, communications director for Generation Progress, a youth research and advocacy group which has been outspoken in their support of the bill, wrote in an email that despite pressure from the federal government, states have a moral responsibility to police inactions from student loan borrowers.

“States have a right and an obligation to investigate and regulate this behavior, protect borrowers and ensure that their citizens can live financially sound lives that contribute to state and local economies,” Hancock wrote. “We have seen in state legislatures around the country … that this is a bipartisan issue and something all legislators concerned about students and borrowers can get behind.”

Going forward, Hancock wrote that other states should follow Massachusetts’s lead. Rhode Island and Maine are currently reviewing similar pieces of legislation to protect students.

“Young people and student loan borrowers around the country should keep an eye out for these Borrowers Bills of Rights passing through state legislatures and ensure that servicer licensing, the key provision of these bills, remains intact…” Hancock wrote. “… we need to be vigilant about lobbyists from big servicing companies torpedoing borrower protections.”

Secretary of Education Betsy DeVos rolled back Obama-era protective regulations for student loan borrowers in April. This move to withdraw these rules that made it easier for students to manage their debt left states scrambling in order to provide safeguards for student borrowers from servicers that “act more like debt collectors than loan counselors,” Hancock wrote.

According to the bill, the appointed ombudsman will help student borrowers look at different repayment options, aid students who wish to apply for federal income-driven repayment plans and assist students who need help resolving billing disputes.

A graduate of Pennsylvania State University said students are in debt due to how expensive college is now and because of how loan situations are handled.

“You look at the older generation and they ask why we don’t have houses or why we aren’t married,” Kevin Field, 29, of Brighton, said. “It’s because we’re in massive student debt, not just because college costs so much but because loan companies take advantage of us.”

Without oversight, loan servicers are able to exploit the students taking advantage of their programs, thus making bills like this necessary, said Allen Harbaugh, a professor at Boston University’s School of Education.

“I think the situation is ripe for abuse,” Harbaugh said. “Agencies … take advantage of loopholes and miscommunication errors and use those violations of the agreements to charge the students more and to put the students at fault … The suggestion that we should let companies monitor themselves is just laughable.”

Harbaugh said he’s surprised the federal government is protecting companies, who have a lot of money, over citizens that need these educational resources.

“If the state government is willing to stand up and say, ‘This is inappropriate and there are better ways to handle this and better ways to address this,’ it’s probably a good thing,” Harbaugh said.


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