The Louisiana Budget Project (LBP) and Student Borrower Protection Center (SBPC) applaud the Louisiana State Legislature for passing House Bill 610 and House Bill 789, which will level the playing field for the state and for borrowers relative to the student lending industry. The groups also urge Gov. John Edwards to swiftly sign these bills into law.
“With the passage of these laws this week, the Louisiana Legislature is tackling some of the greatest challenges that borrowers face with student loans,” said SBPC Executive Director Mike Pierce. “Whether misapplying borrowers’ payments or affirmatively misrepresenting important information to borrowers about their loans, student loan servicer misconduct has been rampant in the industry, which for too long has operated without meaningful oversight. When states like Louisiana step in to provide critical consumer protections it can make all the difference for borrowers who are simply trying to manage their loans and navigate the repayment process.”
House Bill 610 by Rep. Kyle Green, which passed the Senate unanimously and the House 88-2, builds on the movement of states passing “Borrower Bill of Rights” laws to regulate the student loan servicing industry. The bill will impose best practices and business standards already in effect in other states to ensure that borrowers receive accurate and meaningful assistance with their loans, and that industry actors cannot take advantage of borrowers for their own financial gain.
These protections are in direct response to industry abuses that have been revealed after years of state and federal investigations— including by Louisiana’s own Office of the Attorney General —that have harmed borrowers across the country. Louisiana federal and private student loan borrowers now have common sense protections and can expect quality service from their loan servicers.
House Bill 789 by Rep. Matthew Willard, which passed unanimously in both the House and Senate, will shed much-needed light on the private student loan industry, which currently operates with limited federal or state oversight. The lenders operating in this market are major banks and prominent non-banks, but also shadier companies that specialize in subprime debt and who often target low-income and minority communities. These are the companies that partner with for-profit schools and saddle students with debt to pay for low-quality education that will never land them the job they’ll need to repay that debt. With HB 789, Louisiana will join a growing number of states that require these lenders to provide annual reporting to the state on their student loan activities. The Louisiana Office of Financial Institutions will be responsible for analyzing and publishing the data so that consumers and policymakers can make informed decisions about taking out loans and regulating the industry.
These bills, once signed by the governor, will both fill critical consumer protection and data gaps in Louisiana and will build a foundation for future action to address emerging issues that borrowers and policymakers face.
Background on Student Loan Debt in Louisiana.
Louisiana, along with the rest of the nation, is experiencing a student loan debt crisis. Approximately 651,700 borrowers in the state owe a collective $22.5 billion in student loan debt, nearly double the amount owed in 2012, when it was $11.8 billion, and nearly $2 billion of which is private student debt. Approximately half of millennials (47.9%) and a quarter of middle-aged consumers (26.1%) in Louisiana carry student loan debt. As of 2020, nearly 18.8% of Louisiana’s borrowers were delinquent on their debts.
Numerous federal and state investigations into student loan servicers make clear the need for states to step in and protect their resident borrowers. Between 2017 and 2020, state and federal officials across the country brought public enforcement actions against the largest student loan servicers for systematically cheating borrowers out of their rights to affordable payments and loan forgiveness. In 2020, the federal Consumer Financial Protection Bureau (CFPB) began to investigate Education Credit Management Corporation (ECMC), the company that the Louisiana Office of Student Financial Assistance contracts to support borrowers with their federal student loans, for collection costs that it imposes on borrowers. As recently as March 2022, the CFPB sanctioned Edfinancial Services, another student-loan servicer, for “lying to borrowers” and making deceptive statements and misrepresenting their forgiveness and repayment options to them.
Louisiana’s own Office of the Attorney General is well aware of the harm that student loan servicers cause consumers without adequate government protections. In January of this year, Louisiana joined 38 other state attorneys general in a multi-state settlement with Navient, the student loan servicer. The settlement:
resolve[d] claims that since 2009 – despite representing that it would help borrowers find the best repayment options for them – Navient steered struggling student loan borrowers into costly long-term forbearances instead of counseling them about the benefits of more affordable income-driven repayment plans.
As part of the settlement process, Louisiana received a total of $3,600,563 in restitution payments for harm caused to more than 13,000 federal loan borrowers in the state.
About the Louisiana Budget Project
The Louisiana Budget Project (LBP) is a nonprofit research and advocacy organization that monitors and reports on public policy and how it affects Louisiana’s low- to moderate-income families.
Learn more at https://www.labudget.org/ or follow LBP on Twitter @LABudgetProject.
About the Student Borrower Protection Center
The Student Borrower Protection Center is a nonprofit organization focused on alleviating the burden of student debt for millions of Americans. The SBPC engages in advocacy, policymaking, and litigation strategy to rein in industry abuses, protect borrowers’ rights, and advance economic opportunity for the next generation of students.
Learn more at protectborrowers.org or follow SBPC on Twitter @theSBPC.