The Massachusetts Senate passed a “Student Loan Bill of Rights” on April 11, but that doesn’t mean this legislation aimed at protecting borrowers from abusive practices is ready to go. The state may have to go to court to fight the federal government before this legislation can do what it’s intended to do.
The Conflict Between State and Federal Government
In 2015, the Obama administration created rules that would protect student loan borrowers from being charged high interest rates on overdue loans. But those rules were stripped away in 2017 by the Trump administration.
The Trump administration has made it clear any state rules directed at protecting students from the student loan servicing industry are in conflict with the work the federal government is doing to streamline its loan program. It has warned states not to pass legislation aimed at overseeing the student loan industry, even in the name of protecting student borrowers.
But Massachusetts Sen. Eric Lesser, who sponsored the bill, said student borrowers need support when they’re getting ready to enter the workforce and begin paying off their loans. Instead, they hit roadblocks.
“It should be exactly the time when we invest in young people and give them the tools to become successful,” Lesser told the Valley Advocate.
What the Bill Would Do for Borrowers
Under this bill, student loan servicers would be required to be licensed with Massachusetts’ Division of Banks.
From there, the servicers would be under the scrutiny of the Commissioner of Banks. The commissioner could yank a loan servicer’s license if allegations of abusive lending practices were found to be true. Abusive behavior from a lending company could include things like charging students too much or urging them to unwittingly take more expensive repayment options.
If students were overcharged, this bill would force student loan companies to reimburse that money to the borrowers. The companies would also be fined for overcharging the students.
Complaints would be monitored by the Massachusetts Attorney General’s Office.
What’s Next for the Bill
Massachusetts legislators were aware of the federal government’s stance on states enacting their own student loan legislation and were willing to take the risk, even if it means a court battle, according to Lesser.
Although the bill has passed the Senate hurdle, it still has a way to go before it becomes law. A similar draft of the bill must make it through the House of Representatives. If it does, it will make it to the governor’s office, where it will either be signed into law or vetoed.
With one in five people in the state holding student loans, Lesser said he hopes the bill makes it through because there is a need for the kind of protection it provides. And with the cost of college increasing each year, there’s a lot of money at stake for borrowers.
Author: Mike Brown
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