SACRAMENTO, Calif.–The California General Assembly has passed AB376, better known as the “Student Borrower Bill of Rights,” which seeks to create what would be the first detailed set of rules protecting those holding student debt in the U.S.
The legislation now goes to Senate committees and eventually to a floor vote. The bill would need to pass the Senate by no later than Sept. 13 to make it to California Governor Gavin Newsom's desk for his final signature before the end of the year.
According to the Student Borrower Protection Center, which was created by Seth Frotman, a former top student loan official at the CFPB who resigned in August 2018, the ‘Student Borrower Bill Of Rights’ would establish “rules of the road” that would:
- Ban “abusive” student loan servicing practices that take unreasonable advantage of borrowers’ confusion over loan repayment options
- Create minimum loan servicing standards to ensure fair application of payments, improved record-keeping on borrower accounts, and proper staff training so borrowers are informed of more affordable payment options
- Establish a Student Loan Advocate to review borrower complaints, gather data, and issue reports to the state legislature
- Grant the Department of Business Oversight additional “market monitoring” authorities to collect better data about the student loan servicing industry.
Ultimate Goal
Ultimately, the bill would “create the first comprehensive, industrywide ‘rules of the road’ for the student loan industry, offering student loan borrowers the same kinds of strong, enforceable protections available to consumers with mortgages and credit cards,” the SBPC said in a statement.
According to language in the Assembly bill, California is facing a “student debt crisis,” with more than 3.7 million borrowers owing nearly $125 billion in student debt, which is about $33,000 on average.
The overall level of outstanding student debt in the U.S. stood at $1.49 trillion in the first quarter of 2019, up $29 billion from the last quarter, according to the New York Fed.
New data also show delinquency rates on student loans have been increasing, growing to 9.54% in Q1, up from 9.54% one quarter earlier.