Student Loan Providers Not Regulated By State, Proposed Bill Would Change That
DENVER (CBS4)- The average student loan debt in Colorado is now more than $26,000. Student loan debt has surpassed credit card debt and yet student loan service providers are the only kind of lenders not regulated by the state.
Sen. Steve Fenberg, a Democrat representing Boulder, plans to change that.
"It's a big problem for individuals and how they're going to navigate the rest of their life if they're saddled with this much debt but it's also a big problem for this state and this state's economy," said Fenberg.
More than half of Colorado's college graduates are in debt, including Gabi Healy. She graduated from the University of Denver with two degrees and $30,000 in debt.
"I got a job right after I graduated and was really working to save money and getting prepared to pay back my student loans," said Healy.
But she says, without warning, her lender changed the terms of her loans to eliminate a six-month grace period before interest accrued.
"I had to end up paying about $500 in interest that I shouldn't have had to pay," said Healy.
Fenberg says that's why the state needs to regulate student loans, "I would argue that's a predatory practice and flies in the face of basic consumer protections that we have in place for other forms of loans."
He's introduced a bill that would require student loan service providers be licensed. It would also create an ombudsman in the Attorney General's Office. He says, right now, students have nowhere to turn.
"You can maybe bring it up to The Consumer Financial Protection Bureau at the federal level. You probably won't hear back and so you're basically just sending a complaint into a black hole. We want make sure that there is a place here in the state of Colorado that can help people navigate the situations and when it does turn out to be unfair and predatory that the Attorney General can actually take action," said Fenberg.
Healy is among those supporting the bill that passed its first committee. She says she's payed back $8,000 in student loans and that her lender should keep its end of the deal too.
"My story is not unique. This has happened to many Coloradans. Three quarters of a million Coloradans have student debt right now and if they're just having small situations like this that are charging people an extra $500, it's ridiculous what these companies could be getting away with," said Fenberg.
Fenberg has also introduced a separate bill that would require lenders inform students about income based reduction or loan forgiveness programs.
"We want to make sure people are educated and know about their options because many times they're not enrolled in the best plan for them."
State and local government and public schools would also have to notify their employees. Fenberg says many public employees qualify for loan forgiveness.
The bill would also create a state website, or one-stop-shop, for information about student loans.