Bill creates a new licensing process for student loan servicers
Last week, Senator Sal DiDomenico (D-Everett) and his colleagues in the Massachusetts State Senate passed the “Student Loan Bill of Rights,” which gives greater protections to student loan borrowers in disputes with companies servicing their loans.
The bill, S.2380, An Act establishing a student loan bill of rights, requires student loan servicers to be licensed companies with the state Division of Banks, and empowers state officials to investigate the servicers and take action against those that violate the state’s banking and consumer protection laws.
The bill also supports the ongoing work of Attorney General Maura Healey’s Student Loan Assistance Unit by establishing a Student Loan Ombudsman in the Attorney General’s Office, who will lead efforts respond to complaints from student loan borrowers and help them understand their rights.
“It’s no secret that as the cost of higher education continues to rise, students are taking on more and more debt to cover the costs,” said Senator Sal DiDomenico. “Unfortunately, this problem is made worse by the fact that many of them are also being taken advantage of by predatory student loan companies who use deceptive practices to force students into costly repayment plans. This bill is an important next step in the Senate’s ongoing effort to fight exploding student debt by cracking down on the abuses in the student loan industry to better protect our students and families.”
“A college degree has never cost so much. As a result, students are taking on substantial debt, and they are being taken advantage of by servicers who use deceptive practices and wrongly steer them into costly repayment plans. While the Trump Administration, led by Education Secretary Betsy DeVos, continues to side with large for-profit student loan servicers and strip away protections for student loan borrowers, we in Massachusetts are standing up to protect our residents from predatory student loan companies,” said Senator Eric P. Lesser (D-Longmeadow), lead sponsor of the bill in the Senate.
“As public officials, it is our duty to ensure fair and appropriate lending – especially in the student loan industry,” said Senate President Harriette L. Chandler (D-Worcester). “This legislation ensures that Massachusetts residents receive robust consumer protections and that the student loan industry is given the proper level of oversight. I want to thank Senator Lesser for his leadership on this issue.”
“Taking on abuses in the student loan industry has long been a priority of my office. That’s why, in 2015, we created a Student Loan Assistance Unit to help borrowers with their student loans,” said Attorney General Maura Healey. “I thank Senate President Chandler, Senator Lesser and the Senate for providing new resources and tools to protect Massachusetts students and families.”
Under the bill, student loan servicers would have to apply for licenses from the state, which the Commissioner of Banks could revoke if the servicer is engaged in abusive practices such as overcharging students or steering them into costlier repayment plans to make higher profits.
Student loan servicers that break state licensing requirements or take advantage of students could be fined and forced to repay student borrowers under the bill.
The bill now goes to the State House of Representatives, where it awaits further consideration.