By WPRO News and Jennifer McDermott, the Associated Press
Rhode Island’s treasurer and attorney general want a “student loan bill of rights” to protect borrowers from deceptive lending practices.
Treasurer Seth Magaziner and Attorney General Peter Neronha announced a bill Thursday that would provide new protections for borrowers and establish oversight of student loan servicers operating in Rhode Island. The Democratic leaders join a growing movement among states to protect those who take out student loans.
A Maine lawmaker is currently making a push to create a state system to oversee student loan services operating there. Oregon’s attorney general wants to regulate student loan services and force them to be licensed under the state. Connecticut’s student loan bill of rights has been picked up by other statehouses nationwide.
Magaziner said borrowers too often don’t receive accurate information about their loan, which can result in higher interest, leave them in debt longer and make them more likely to default. More than 133,000 Rhode Island residents, including 16,000 senior citizens, have a combined $4.5 billion in student loan debt, and over $470 million of that debt is delinquent, according to Magaziner’s office.
“All too often, when people call their servicers and say ‘hey, I’m having a hard time keeping up with my payments, what can I do?’ The servicers either don’t tell people that income based repayment exists, or give people the wrong information about how to be eligible or try to steer them into other more expensive options” Magaziner said.
Representative Joseph McNamara, of Warwick, and Senator Dawn Euer, of Newport, are sponsoring the bill. Euer said she hears horror stories from borrowers often.
“They’re being told that the paperwork that they filed eight years ago was not complete, was not correct, even though they were directed to file this paperwork by the servicers,” she said.
The bill would set standards for student loan servicing to prohibit predatory behavior and provide best practices for protecting consumers’ rights. It would also require that student loan servicers register with the state and state regulators would be allowed to examine their business practices. The state could penalize servicers that violate these terms and seek restitution.
“With the federal government focused on weakening consumer protections, it really fortifies our duty as a General Assembly to protect student borrowers,” McNamara, the chairman of the House Committee on Health, Education and Welfare, said Thursday.
The Trump administration has discouraged states from regulating student loan servicers, and the Department of Education has said that only the federal government can oversee the student loan program. But student loan servicers have had mixed results when making similar arguments in lower courts nationwide.
Rhode Island’s Commissioner of Postsecondary Education Brenda Dann-Messier and the Director of the Business Regulation Department Liz Tanner joined with Magaziner and Neronha in supporting the new proposed protections.
McNamara said this is the third year he has introduced legislation on this topic, but he’s more optimistic about its chances now. There was opposition in the past to giving oversight to the postsecondary commissioner’s office or to the business regulation department, he said. This year’s proposal would have the attorney general’s office work in conjunction with the business regulation department.
