A bill to protect student loan borrowers from deceptive loan service companies has cleared the state Senate.
Almost two-thirds of undergraduate students in the Bay State finish college with an average of nearly $30,000 of student loan debt. That’s a 75 percent increase since 2004.
According to Deirdre Cummings, legislative director with the consumer watchdog group MASSPIRG, some loan-servicing companies charge excessive fees, misrepresent products and steer borrowers to more expensive options. But Senate Bill 2380 would hold them accountable.
“Any loan servicer doing business in Massachusetts will now have to be licensed by our own state Division of Banks,” Cummings said. “And then, they can enforce these really strong consumer protection laws we have here in Massachusetts.”
The bill passed the Senate by unanimous vote, and now moves to the House for consideration.
SB 2380 would also establish a Student Loan Ombudsman office to review practices, resolve disputes and educate borrowers. Cummings pointed out that these protections would not apply only to students.
“We’re also seeing a huge increase in older folks in Massachusetts, older than 60, also taking out student loans for their children,” Cummings said.
The bill authorizes the attorney general’s office to take action against loan service companies that violate the law.
Cummings adds that when student loan borrowers become victims of deceptive lenders, it increases the threat to their entire economic future.
“We are going to see problems down the line when people can’t fully participate in their communities because they are so strapped with debt,” she said.
Similar laws have passed in Connecticut, Illinois and Washington, and have been introduced in a dozen more states.