Advocates Cheer Passage of Student Debt Reform Bill
May 1, 2019
Denver— This afternoon, the Colorado legislature gave the final thumbs up to Senator Faith Winter’s SB19-002, a bill that will bring oversight of student loan servicers in line with other consumer loan providers in the state. Among licensing requirements and establishing prohibited actions for student loan servicers operating in Colorado, the bill will add a full time Student Loan Ombudsman to the Attorney General’s office to act as a resource for borrowers working to navigate the loan repayment process.
According to recent reports, more than 730,000 Coloradans are working to pay back over $27 billion of student loan debt. Advocates point to reports that student loan servicers, the private companies contracted by the federal government to help ensure borrowers repay their loans, don’t always act in the debt holder’s best interest, making this bill necessary to protect Coloradans with student loans.
“At the very least, the process of repaying student loans should be a fair and transparent one,” explains Charley Olena, Advocacy Director for New Era Colorado and the lead advocate in the coalition that worked to make this bill a reality. “Student loans are the only type of major consumer loan without licensing requirements for servicers nor consistent state or federal regulations to govern their behavior—unlike servicers handling mortgages, credit cards, and even payday loans.” Coloradans, she says, should be able to trust that they can get accurate, timely information from their loan servicer, but that’s not how the system works right now.
Karen Cody-Hopkins, a lawyer specializing in student loans in Colorado, says this kind of legislation is long overdo. “I see everyday how Coloradans struggle to find and understand our complex federal and private student loan system,” says Cody-Hopkins. “With 27+ types of federal loans plus multiple repayment, forgiveness and discharge options, just figuring out how to manage your federal student loans can be daunting—SB19-002, the Student Loan Servicer Accountability Act, will give students a trustworthy process to ensure that their loan servicers properly and fully inform borrowers, process payments, and resolve disputes. I have seen too many borrower horror stories of misinformation or mistakes. SB19-002 will help hundreds of thousands of Coloradans get the consumer protection they have lacked.”
One of the nation’s largest student loan servicers, Navient, is facing a joint lawsuit from the Consumer Financial Protection Bureau and the states of Illinois and Washington claiming they defrauded over 1.5 million borrowers and added over $4 billion to the lifetime costs of their loans. In response to numerous reports highlighting bad behavior from federal loan servicers, and the Department of Education’s shift away from oversight under Betsy DeVos, many states are turning to the kind of legislation Colorado is adopting with SB19-002.
“With Washington walking away from the fight to protect student loan borrowers, it is more important than ever that states fight for their citizens,” says Seth Frotman the former top student loan watchdog at the Consumer Financial Protection Bureau and current Executive Director of the Student Borrower Protection Center. “This legislation is an important step towards ensuring that the more than 700,000 Colorado student loan borrowers have critical protections against predatory players.”
The coalition working to advance this legislation is diverse—with representation from teachers unions, veterans organizations, seniors groups, student loan lawyers and policy shops. For AFT Colorado, one of Colorado’s teachers unions, SB19-002 is a way to help ensure teachers and other public service employees get the support they need from their loan servicers. “At a time when many Colorado educators are struggling to afford living within the communities in which they teach, it is essential to the continued success of Colorado’s public education system that they are receiving the assistance they need to enroll in programs that provide them financial relief and incentivize remaining in the profession they love,” explains Ryan Case, political director at AFT. “We would like to thank all of the sponsors of SB19-002 for standing up for Colorado’s educators, and other public service employees, by ensuring negligent student loan servicers are held accountable for their actions.”
The bill will next head to Governor Jared Polis’ desk to be signed into law.
From other advocates:
“The student debt crisis is having a profound impact on the ability of people to establish financial security and invest in their futures, particularly low-income families and people of color. States like Colorado have the right and the responsibility to mitigate these impacts by overseeing student loan servicers and preventing fraud and abuse. We applaud Colorado lawmakers for taking this step toward accountability for servicers.” -Ellen Harnick, Western Office Director, Center for Responsible Lending
“Student debt is a huge challenge for many Colorado families. Borrowers will now have more resources for help, and the companies who serve their loans will have more accountability and responsibility to the people of Colorado.” – Ali Mickelson, Director of Legislative and Tax Policy for the Colorado Fiscal Institute.
“The passage of the Student Loan Servicers Accountability Act is a big win for Colorado families. With student debt on the rise, many Coloradans don’t see a college education as an option, let alone an opportunity. We are pleased to see the legislature recognizing the importance of this issue and acting boldly to help borrowers of all ages be treated fairly and equitably.” -Cate Blackford, Director of Outreach for the Bell Policy Center.
“SB2’s passage is a great victory for all Coloradans whether or not they have student loans. The impact on the economy is felt when many are unable to purchase their first home and fully participate in Colorado’s economic opportunities, as well as with seniors struggling to make payments on a fixed income. Leveling the playing field and requiring servicer accountability in providing fair options for borrowers, is the right thing to do!” – T. A. Taylor-Hunt, Colorado State Chair of the National Association of Consumer Advocates
“SB19-002 takes a meaningful step towards addressing the student debt crisis in Colorado by ensuring that borrowers are treated fairly by loan servicers. This bill will make student loan servicers more accountable and transparent, and give borrowers tools to end abusive practices that often land them in deeper debt. We are very glad SB002 was passed this year, and look forward to it going into effect.” -Wendy Howell, Working Families Party
“With Colorado facing a $26 billion student loan crisis, the Student Loan Servicer Accountability Act is a much-needed step towards holding loan servicers accountable for misleading the state’s young people. Today’s students are the most diverse — and the most burdened by student loan debt — in history. We need to act now to stem the rising tide of student loan debt and help make an affordable, quality education available to every young person in the Centennial State.” -Christina Postolowski, Rocky Mountain Regional Director of Young Invincibles.
New Era Colorado is a non-profit nonpartisan organization whose mission is to reinvent politics for young people, mobilizing and empowering a new generation to participate in our democracy to make Colorado a better place for everyone.