Massachusetts readies for legal fight over ‘Student Loan Bill of Rights’

State legislators hope to create a “Student Bill of Rights,” which passed in the state Senate on April 11 and aims at granting better protections for students in disputes with loan service companies. There’s one catch though: the federal government doesn’t want states regulating the student loan service industry and Massachusetts may have to fight for the proposed law in court.

“Right when [students are] about to enter the workforce to become productive members of society — to becoming taxpaying members of a community  is when we strip every last resource out of them … and that’s wrong,” State Sen. Eric Lesser (D-Longmeadow), the lead sponsor for the bill, told the Valley Advocate. “It should be exactly the time when we invest in young people and give them the tools to become successful.”

The Obama Administration created a student loan borrowers bill of rights at the federal level through the Department of Education in 2015, which was abolished by the Trump Administration in 2017, according to the Atlantic. 

Education Secretary Betsy DeVos and the Trump Administration have not been in favor of regulating the loan service industry. In March, Devos publicly stated that state rules aimed at creating consumer protection for the industry undermine the federal government’s goal to create a streamlined federal loan program and prohibited states from enacting legislation to regulate the industry, according to the Boston Globe.

Lesser said state officials anticipate a lawsuit from the federal government and are willing to fight on this issue.

“My feeling is that we should welcome that suit; we should stand up and fight,” he said.

The bill, S.2380, would require student loan servicers to be licensed with the state’s Division of Banks allowing state regulations to be put into place. The Commissioner of Banks could revoke a loan service company’s license if the business is found to be engaging in abusive practices such as overcharging students or steering them into costlier repayment plans, Lesser said. Under the bill, loan service companies would also be required to repay students who’ve been overcharged and fined.

The student loan bill of rights would establish a Student Loan Ombudsman for the Attorney General’s Office, who would lead efforts to respond to complaints, according to the bill.

In a press release, Attorney General Maura Healey said taking on abuses in the student loan industry is a priority for her office.

“In 2015, we created a Student Loan Assistance Unit to help borrowers with their student loans,” Healey said. “I thank Senate President Chandler, Senator Lesser, and the Senate for providing new resources and tools to protect Massachusetts students and families.”

Sen. President Harriette Chandler (D-Worcester) stated in a press release that this legislation ensures that Massachusetts residents would receive “robust consumer protections” and the student loan industry would be given “the proper level of oversight.”

The next step is for the a similar version of the bill sponsored by State Rep. Natalie Higgins (D-Leominster) to pass in the House of Representatives, before it makes its way to Gov. Charlie Baker’s desk to be signed into law or vetoed.

“We need to get it through the House first, but my hope is that he would sign it,” Lesser said. “I would expect him to sign it because it’s a really important piece of legislation for our students. In Massachusetts, we now have one out of five people who have outstanding student loans. There’s been a 75 percent increase in the average student loan debt held by people in Massachusetts. This is really a crisis. It’s an issue that’s reached a boiling point.”

Lesser said students pay for double the amount for their higher education today compared with students 10 to 15 years ago.

“We did a millennial round table across the state and what we heard from our constituents is that the student loan crisis is poisoning the rest of our economy because it’s impacting decisions across the board,” he said. “Young people are delaying their ability to buy homes. They’re delaying their ability to get married; to have kids … People are less willing to start businesses or take risks because of these mounting debts that are hanging over their heads.”  

Chris Goudreau can be reached at cgoudreau@valleyadvocate.com.

Author: Chris Goudreau

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