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Five states so far this year have passed new laws aimed at protecting student loan borrowers, with three more "steps away" from doing so and similar bills filed in a handful of others, including Massachusetts, according to a new report tying the heightened activity to a relaxing of federal oversight.
An issue paper from the Hildreth Institute, a Boston nonprofit focused on college affordability, says states have been left with "no choice" but to pass such bills "in the absence of federal leadership on regulating the loan servicing industry."
The institute supports "student loan bill of rights" legislation filed by Sen. Eric Lesser and Rep. Natalie Higgins, which would create the position of student loan ombudsman within the attorney general's office and require state licensing of student loan servicers.
The ombudsman, according to the institute, would resolve disputes with loan servicers and help borrowers explore repayment options, avoid or get out of default, end wage garnishments and apply for income-driven repayment plans.
Lesser's bill (S 160) is scheduled for a hearing Monday afternoon before the Consumer Protection and Professional Licensure Committee, while Higgins' bill (H 998) had a hearing in May before the Financial Services Committee.
"Our own Student Loan Bill of Rights would ensure that every Massachusetts borrower receives robust consumer protection and effective assistance creating adequate oversight to ensure that the student loan industry is helping borrowers, not its own profit margins," the institute said in its paper.
Massachusetts is one of 13 states where lawmakers this year have proposed ombudsman bills or other legislation aimed at providing protections to student loan borrowers, according to the report. New York, Maine, Maryland, Colorado and Nevada all passed student loan laws this year.
Last year in Massachusetts, the Senate unanimously passed a version of the student loan bill of rights legislation in April, and it later died in the House Ways and Means Committee.
At a press conference promoting the refiled bill in March of this year, Lesser said its supporters have done "quite a lot of work here at the State House to get the issue onto people's radar" since last session, and pointed to a "lack of enforcement" at the federal level as one reason for growing interest in the issue.
The institute's paper cited a March report from the U.S. Department of Education's inspector general, which the institute said "shows an alarming picture of the government systematically failing to oversee its student loan servicing agency."
The inspector general's federal student aid office audit found that nearly 92 percent of monthly reports on monitored calls between servicers and borrowers included at least one instance of the servicer "not sufficiently informing borrowers about available repayment options," and that 61 percent of oversight reports included examples of loan servicers not complying with federal requirements.
The Hildreth Institute said one of Education Secretary Betsy DeVos' early moves in office was to repeal Obama-era directives that heightened oversight of the servicer industry, and that the student loan watchdog position at the Consumer Financial Protection Bureau has been left vacant for more than six months.
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