by Student Loan Debt: Expansion of Borrowers’ Rights?
Kellen Wittkop[*]
College students navigate a constant balancing act of managing the many stresses that accompany enrollment at any institution of higher learning: classes, activities, job searches, etc. But one of the largest causes of anxiety for students is something that often looms largely in the shadows – debt. According to American Student Assistance, a non-profit organization that promotes itself as a “nonprofit you can rely on for neutral, honest student loan solutions,” of the approximate 20 million students in attendance each year, 60% (12 million) of those students borrow annually to cover costs of their education.[2] Estimates from the Federal Reserve Bank of New York and the Consumer Finance Protection Bureau (CFPB) put outstanding student loan debt in the range of $902 billion to $1 trillion.
Some members of Congress have recognized this problem and have taken action. In late December 2013, a group of Democratic senators—led in large part by former Harvard Law professor Elizabeth Warren—announced a package of bills aimed largely at giving student loan borrowers greater rights, now officially titled the “Student Loan Borrower Bill of Rights.”[3] Essentially, the bill seeks to amend the Truth in Lending Act to provide greater disclosure information to borrowers and direction for the order of payment applications by servicers, among other goals.
Some of the issues covered in the bill include: new regulations for servicing private loans (about 14% of all student loans) involving advising the borrower of their long-term options; a “Bill of Rights” section aimed at directing servicers to apply any extra money to outstanding loan principle with the highest interest rate, helping to ensure that borrowers pay down their more expensive loans first; a similar section for the “rights” of borrowers of federal student loans including an instruction to the CFPB to draft rules promoting cost-minimization for borrowers; and other sections involving specific provisions for members of the military and enrollment verifications for servicers.[4] The bill has been referred to the Committee on Health, Education, Labor, and Pensions.
For now, those of us with the specter of debt imminent to our futures, we can only hope that this bill and others like it will change the culture of student loan borrowing. As Senator Jack Reed stated, “If we’re going to make a dent in making college affordable, we have to hold servicers accountable, increase transparency, and ensure students and their families get a fair deal.”[5]
[*] J.D. Candidate, Harvard Law School, 2016.
[2] Steven Hansen, Are Student Loans Destroying Consumption?, Seeking Alpha (Dec. 30, 2012, 3:09 AM), https://seekingalpha.com/article/1086811-are-student-loans-destroying-consumption [https://perma.cc/7YJP-XHBE].
[3] S. 1803, 113th Cong. (2013).
[4] Karen Weise, Unpacking the Proposed Student Loan Borrower Bill of Rights, Bloomberg Businessweek (Dec. 13, 2013), https://www.bloomberg.com/news/articles/2013-12-13/unpacking-the-proposed-student-loan-borrower-bill-of-rights [https://perma.cc/VK75-NWUN].
[5] Press Release, Office of Sen. Dick Durbin, Durbin, Warren, Boxer, Reed Introduce Student Loan Borrower Bill of Rights (Dec. 11, 2013), https://www.durbin.senate.gov/newsroom/press-releases/durbin-warren-boxer-reed-introduce-student-loan-borrower-bill-of-rights [https://perma.cc/GW8C-RNDP].