Local legislators favor measure to fight fraud in student lending
Apr. 17—The cost of higher education can stick with a student well after graduation.
In fact, a study hosted by state lawmakers during the summer 2019 showed the average debt load carried by students is $31,678, totaling over $14.5 billion outstanding. Of that, $2.26 billion is in delinquency, and throughout the country, student loan delinquency has risen to more than $1.7 trillion.
It's one of the reasons why presidential candidates have continued to debate over the burden of student loan debt. With enough debt on students' plates, the Oklahoma Legislature is eyeing a measure that would create protection for student borrowers, and establish the Student Borrower's Bill of Rights.
"The Student Borrower's Bill of Rights would create a fair, clear, and common-sense approach to lending that protects potential, current, and former students that must borrow money to pay for their education," said State Rep. Melissa Provenzano, D-Tulsa, the House author.
SB 261 received approval from the state Senate in early March, and passed out of House committees at the end of March. It still has one final hurdle to make: approval from lawmakers on the House floor. Now that legislators have begun hearing legislation from the chambers opposite of them, they will have to meet next week's deadline to send it on to the governor.
Local legislators call it a common-sense bill.
"It just outlines some parameters for loans to make sure the kids don't get gigged with any higher interest rates or anything that would make it more difficult for them to borrow money and pay it back," said State Sen. Dewayne Pemberton, R-Muskogee. "A lot of bills go right through because they're common sense."
Essentially, the bill is meant to prohibit student loan servicers from doing anything that misleads, deceives, or defrauds students who are trying to take out loans for their education, or pay them back. According to the language, it would be unlawful to "engage in any unfair or deceptive practice toward any person or misrepresent or omit any material information in connection with the servicing of a student education loan including, but not limited to, misrepresenting the amount, nature or terms of any fee or payment due or claimed to be due on a student education loan, the terms and conditions of the loan agreement or the borrower's obligations under the loan. ..."
"It needs to be that way, anyway," said State Rep. Bob Ed Culver, R-Tahlequah. "I guess there are ways that people circumvent the system all the time. To me, that's just common sense. Why do we have to pass a law to make sure you, as a lender, aren't lying to the lendee?"
In early March, a state court in Washington ruled that one of the nation's biggest student loan servicers, Navient, illegally deceived borrowers and their cosigners about what it would take to release them from the loan obligation. It's not the first example of loan companies misleading their clients, as multiple companies have been accused of misleading students into plans that benefited lenders.
The author of the bill made it clear the legislation is not to help with loan forgiveness. While the idea of wiping out student loan debt has been discussed at the national level, it doesn't appear state officials are ready to look at such measures. Culver and State Sen. Blake Stephens, R-Tahlequah, both question the practicality of the idea.
"There are a bunch of people who get themselves in a bind, and you would like to help them out, but it boils down to who wants to pay for it?" asked Culver. "This year, the state looks like we're going to be pretty good budget-wise, but that doesn't guarantee next year and the year after. So we need to be frugal and good stewards of what we're entrusted to do."
Dell Barnes, Cherokee County Democratic Party Chair, said the bill sounds like a good idea, but he also like the idea of reprieves.
"Student loan forgiveness can be a great way to encourage public service and make new pathways for committed citizens," he said.