In the midst of a deep recession, with many unemployed and many lost unemployment benefits, it is crucial that the California State Legislature enact Assembly Bill 376 to protect the millions of Californians who owe student loans.
Over 4 million Californians have taken out loans to pay for their education. Their student debt stands at $ 147 billion. the Bill of Rights for Student Borrowers, AB 376, would not eliminate these financial obligations, but would provide essential protection for many people who repay their payments. student loan debts.
The law would require prompt processing of student loan payments and accurate entry of payments to the borrower’s accounts. It would ban lenders from assessing excessive late fees, capping them at 6% of the outstanding balance.
It would ban abusive collection practices, adopting federal standards within California law and granting the Attorney General and the Department of Business Oversight broad enforcement power. The law would also create special protections for vulnerable populations, such as military families, teachers and borrowers with disabilities.
Additionally, AB 376 would create a new Student Borrower Ombudsman within the Department of Business Oversight to help people with student loans get their questions answered and resolve disputes with lenders. Many other states have created such a position, including Colorado, Illinois, Maryland, Minnesota, Nevada, New York, Virginia, and Washington.
These reforms are long overdue, but the enormous economic hardships many are facing as a result of the coronavirus pandemic make them urgent. The inability to make loan repayments has dire consequences: borrowers are at risk of default, which can include wage garnishment and limited access to additional help. Meanwhile, the unpaid obligation keeps growing. Catching up with arrears is getting harder and harder, and student debt is usually not even dischargeable in bankruptcy.
There has been student loan relief in the past six months, but it is about to expire. Governor Gavin Newsom decree of 23 April granted 90-day interest and payment relief to individuals with private student loans with 21 private student loan services operating in California. This relief ended on July 23.
Federal CARES Law provided student borrowers with six months interest and principal free, retroactive to March 13. But that relief will end on September 30, and borrowers have already started receiving notices that repayment obligations will resume. Additionally, millions of student borrowers with commercially held student loans were not eligible for relief under the CARES Act.
President Trump announced last week that he was signing an executive order to extend student loan relief owed to the federal government until December 31. However, it is not known whether he has the constitutional authority to do so. And his ordinance provides no relief on debts owed to any other lender. Nor does it offer any protection against abusive collection practices.
Overall, the Trump administration is very on the side of lenders and not inclined to regulate them. Education secretary Betsy DeVos, the Consumer Financial Protection Board, and the Trump administration have not helped provide protections against abusive practices. They have backed the student loan officers against the students every time.
In 2016, California enacted the Student Loan Servicing Act, AB 2251. This bill created a regulatory licensing program within the Department of Business Oversight and
gave him the ability to oversee the companies that handle student loans in California. But the law passed before the pandemic did not go far enough to protect student debtors from abusive collection practices.
Millions of Californians are suffering tremendously from the coronavirus recession and it could get worse soon. Unemployment insurance is about to end, as is mortgage and rent relief. Common sense and basic AB 376 protections are essential.
Erwin Chemerinsky is Dean and Professor of Law at UC Berkeley School of Law. He can be contacted at [email protected]