Among other worrying facets of the currently proliferating student loan crisis, there is growing concern surrounding the poor treatment of student loan borrowers at the hands loan providers – those people whom, in theory, exist to serve borrowers of student loans and aid them in the processes of effectively managing and repaying their student loan debts. Evidently, not all student loan providers have lived up to the standards and principles which justify their jobs. Suzanne Martindale, the senior policy counsel and western states legislative manager for Consumer Reports, diagnosed the problems within the student loan services industry, going on the record saying: “Multiple investigations have shown that loan providers routinely lose paperwork, misapply payments, provide borrowers inaccurate information, and even steer them into more costly payment options with virtually no accountability.”
To combat these negligible and corrupt behaviors, California lawmakers have recently passed a new law dubbed ‘The Student Loan Bill of Rights’ which aims to protect borrowers with student loans by targeting student loan providers. The legislation would specifically attempt to: 1.) ban the abusive practices of student loan providers, 2.) establish minimum standards of acceptability for those who work in loan servicing (which would ensure student loan payments are applied correctly, loan records are maintained accurately, and student loan servicer staff members receive the proper training to provide accurate information about available repayment options), 3.) create a Student Loan Advocate position which would exist solely for the purposes of reviewing borrower complaints and keeping the state legislature informed as to the developments of these issues, and 4.) grant the Department of Business Oversight additional powers of ‘market monitoring’ to collect data about the student loan servicing industry.
Proponents of the widely bipartisan legislation claim these measures are to counteract rising default rates on student loans as the crisis continues to exacerbate, becoming the second highest consumer debt category behind only mortgage debt according to the latest student loan debt statistics. There are more than 44 million American borrowers who collectively owe more than 1.5 trillion dollars in student loan debts. In California alone – where the ‘Student Loan Bill of Rights’ legislation originated – there are 3.7 million people who collectively owe an estimated 125 billion dollars in student debt, and more than half a million of these individuals are reportedly behind on their student loan payments. Whatever role the problematic practices of student loan providers played in worsening the trends of student debt and the financial consequences felt by the wronged borrowers on the receiving end of those student loan providers’ misdeeds, is despicable.