President Joe Biden (Photo by Drew Angerer/Getty Images)
A student loan borrower bill of rights may be coming to your state.
Here’s what you need to know — and what it means for your student loans.
Student Loans
While student loan borrowers await the prospect of wide-scale student loan cancellation, there’s a growing trend that could help provide student loan relief. It’s called a student loan borrower bill of rights. States including California, Colorado, Connecticut, District of Columbia, Illinois, Maine, Massachusetts, Maryland, New Jersey, New York, Rhode Island, Virginia and Washington have implemented policies to help student loan borrowers. This may be especially important to student loan borrowers, since federal student loan payments are scheduled to resume starting October 1. Here’s how they work and what they mean for your student loans:
Student loans: borrower bill of rights
A student loan borrower bill of rights helps protect student loan borrowers from deceptive or fraudulent practices and helps ensure that student loan borrowers get a fair shake when dealing with student loan repayment. In 2020, Governor Gavin Newsom signed legislation to establish a student loan borrower bill of rights. This came one year after New York passed the Student Loan Servicing Act. Here’s an example of the California student loan borrower bill of rights and the New York student loan borrower bill of rights:
California Student Loan Borrower Bill of Rights
In California, student loan borrowers have the following rights, among others:
- prohibits abusive practices from student loan servicers;
- prohibits unfair or deceptive practices, as well as misrepresentation or omission of material information;
- ensures student loan payments are processed accurately and timely;
- caps late fees at 6% of the amount past due;
- requires student loan services to process income-driven repayment plans accurately and promptly;
- expands procedures for handling written requests from student loan borrowers; and
- creates a Student Loan Ombudsman position to represent the interests of student loan borrowers and to help solve consumer complaints.
New York Student Loan Borrower Bill of Rights
In New York, student loan borrowers have the following rights, among others:
- right to a detailed financial aid letter from schools in New York;
- clear and accurate information about your student loans, including all terms;
- information regarding available student loan payment plans;
- student loan servicers who treat student loan borrowers respectfully and don’t engage in deceptive practices of provide misinformation;
- accurate student loan payment reporting to credit bureaus; and
- prompt responses to your complaints
How to complain about your student loans
If you need to file a complaint regarding your student loans or student loan servicer, make sure it’s in writing. You can contact any one or more of the following:
- Your lender
- Your student loan servicer
- Your state attorney general
- The U.S. Department of Education
- Consumer Financial Protection Bureau (CFPB)
- Federal Trade Commission (FTC)
- State education department or financial services department
Student loans: toward a federal student loan borrower bill of rights
Expect more states to implement a student loan borrower bill of rights. What does this mean for your student loans. A student loan borrower bill of rights means you will have more protections as a student loan borrower and can expect student loan servicers to be held accountable if they engage in any unfair or deceptive practices. The goal is to make the student loan borrowing and student loan payment process simpler and smoother for borrowers. Many student loan borrowers and advocates also have called for a federal student loan borrower bill of rights. Sen. Elizabeth Warren (D-MA), Sen. Dick Durbin (D-IL) and others in Congress have proposed legislation to establish a student loan borrower bill of rights. For example, The Student Loan Borrower Bill of Rights Act of 2019 would have required student loan servicers to implement uniform servicing and disclosure standards across private and federal student loans by amending the Truth In Lending Act. That legislation, if passed, would have limited late fees on student loans, improved protections on private loans, improved prompt resolution of student loan servicing errors, and improved disclosures when your student loan is sold, among other benefits.
Student loans: next steps
Student loan payments will resume starting October 1, unless President Joe Biden postpones student loan payments and extends the federal student loan payment moratorium. By pausing student loan payments for eight months, Biden has provided more time for student loan servicers to train their employees and implement improved standards for performance and customer service. That said, Warren says student loan borrowers are not prepared to start student loan payments again. How will this impact student loan borrowers? According to a recent survey, 90% of student loan borrowers say they’re not ready to resume student loan payments. The U.S. Department of Education wants to ensure a smooth transition to student loan payments, which means that student loan servicers must be prepared if student loan payments restart October 1. For now, in addition to the U.S. Department of Education, the states also have been leading the charge to oversee student loan servicers and offer additional protection for student loan borrowers. Biden has championed more protections for student loan borrowers and is committed to strengthening the CFPB. The U.S. Department of Education, with the hiring of Richard Cordray, will enhance oversight of student loan servicers to ensure that student loan borrowers get a fair shake when it comes to their student loans. State attorneys general also will continue to regulate student loan servicers. For example, Massachusetts Attorney General Maura Healey has filed several lawsuits against student loan servicers such as Navient and FedLoan Servicing (who announced it would end its contract to service federal student loans) to hold them accountable for unfair practices toward student loan borrowers.
If you have student loans, make sure you have a solid plan for student loan repayment. Here are some potential options to consider:
