Student Loan Borrower Bill of Rights

In December 2013, U.S. Senators Barbara Boxer (D-CA), Dick Durbin (D-IL), Jack Reed (D-RI), and Elizabeth Warren (D-MA) introduced legislation that seeks to provide protections for students with federal or private education loans. This proposed legislation, known as the Student Loan Borrower Bill of Rights (the “Bill”), would provide six basic rights for all federal and private student loan borrowers:[1]

1. The right to have alternative payment plan options to avoid default;
2. The right to be informed of key loan terms, conditions, and repayment options to ensure knowledge of plan costs;
3. The right to know who the loan servicer is, as well as who to contact when an issue arises;
4. The right for the student to be assured that monthly payments will remain consistent throughout the loan period. Lenders should also honor any advertised promotions or promises;
5. The right to fair repayment options (such as grace periods if the loan is transferred, or the option to cancel debt in the event the borrower dies or becomes disabled); and
6. The right to accountability, including the prompt resolution of errors.

According to Senator Durbin, “[s]tudent loan debt has tripled over the last decade.”[2]  In support of the Bill, Senator Durbin commented as follows:

With student loan debt far outpacing the rise in starting salaries, many borrowers find that despite their best efforts, they are unable to make their monthly payments. And when lenders refuse to work with them on a repayment plan, they begin a downward spiral that is difficult to turn around. These borrowers and their families should not have to face the burden of additional costs because they cannot resolve errors quickly or gain access to programs meant to help them. The Student Loan Bill of Rights will ensure that all borrowers will have access to basic rights and protections.[3]

Student loan service provider reform was also voiced in a recent report by an independent federal agency, the Consumer Financial Protection Bureau (“CFPB”).[4] According to this CFPB report, many student-borrowers experience a multitude of problems as a result of their limited access to basic information regarding their loans. For example, many students with federal loans are unaware of beneficial repayment options available to them, including income-based repayment and public-service loan forgiveness. The CFPB also found that many loan service providers allocate the students’ loan repayments across all loans the students have, rather then applying the repayments to the higher-interest loans first.  As a result, many students accrue greater interest than needed, and thus delay the possibility of ever completely repaying their loans. Additionally, the CFPB report noted that student loan borrowers often have difficulty accessing full payment histories and information, and also face numerous hurdles when seeking to modify their loans.

If you or your institution would like more information regarding education related issues, please email James G. Ryan at jryan@cullenanddykman.com or call him at  516-357-3750.

Special thanks to Melissa Cefalu, a law student at Maurice A. Deane School of Law, and Scott Brenner, a law clerk at Cullen and Dykman, for their assistance with this post.