U.S. Sen. Dick Durbin (D-IL) sponsored legislation on Tuesday that would introduce a student loan borrower’s “Bill of Rights.”
The Student Loan Borrowers Bill of Rights Act, S. 3404, would provide consistent servicing and disclosure standards across private and federal student loans, as well as allow the U.S. Secretary of Education to adjust those standards for federal servicers through regulation benefitting student loan borrowers. The lawmakers said more than 43 million Americans hold $16 trillion in cumulative student loan debt, which prevents many of them from buying homes, retiring or starting their own businesses.
“Student loan debt is a crushing weight on the backs of American students and families and repaying student loans can be a difficult and confusing process. The Student Loan Borrower Bill of Rights Act sets out basic rights that I believe all student borrowers are entitled to, and that can protect them from falling behind in payments,” Durbin said.
The legislation would ensure borrowers are treated fairly and provided with education about the repayment options and resources available to them. Additionally, the legislation would improve disclosures when loans are sold or transferred, standardize the application and allocation of payments among multiple loans in a manner most beneficial to borrowers, remove a borrower’s record of default from their credit history when they act to rectify their default and prohibit servicers from using mandatory arbitration clauses or class action restrictions from bringing suits against the servicers.
The legislation would also create a Student Loan Servicing Interagency Working Group to provide recommendations around servicing contracts; establish repayment specialists, specially trained to focus on keeping at-risk borrowers from defaulting; and codifies the authority of the Consumer Financial Protection Bureau Student Loan Ombudsman.
“Families across Minnesota are grappling with the daunting weight of student loans, and a repayment system that is far too complex,” said U.S. Sen. Tina Smith (D-MN), a cosponsor of the bill. “Student debt stops families from building wealth through buying a home and entrepreneurs from starting a business. I hear from Minnesotans who find the repayment system arbitrary, unfair and too complex. The Student Loan Borrower Bill of Rights brings much greater clarity and fairness to our repayment system and will go a long way to improving the system for borrowers.”
The bill is endorsed by the Student Borrower Protection Center, National Consumer Law Center, Student Debt Crisis Center, the National Association of Consumer Advocates, and Americans for Financial Reform, among others.