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Student loan bill of rights protects R.I. borrowers

Legislators pass consumer rights bill in July, following lead of six other states

In February 2019, Roger Williams Law School alum Kara Humm visited the office of Sen. Jack Reed, D-RI, to tell him about the “uphill battle” she’d been fighting for five years against her student loan servicing company. Three days later, her servicing company denied her loan forgiveness, which she believes she qualified for after spending more than 10 years in public service.

For most students with federal loans, servicing companies serve as an intermediary between the government and their wallets. Humm, whose loans were processed by FedLoan Servicing, said her application was denied because that company misled her during the loan repayment process — ultimately preventing her from making the necessary number of monthly payments to qualify for loan forgiveness under the College Cost Reduction and Access Act of 2007. For example, Humm says the company placed payments in a forbearance program without her knowledge for months and disqualified some of her other payments on the grounds that she submitted them too early in the month.

“It’s extremely frustrating to be doing everything you’re supposed to do and not being able to get anywhere,” she said.

FedLoan Servicing could not immediately be reached for comment.

Humm is one of many who have called for legislators to protect student loan borrowers from deceptive lending practices, and the Rhode Island State House responded by enacting the student loan bill of rights on July 26. The law is modeled on similar legislation that has passed in six other states. Gov. Gina Raimondo will do a ceremonial signing on Monday.

Rhode Island’s student loan bill of rights comes as more than 133,000 Rhode Island residents owe a combined $4.5 billion in student loan debt, 10.4 percent of which is overdue, the Boston Globe reported. Nationwide, 44 million student loan borrowers accumulate $1.56 trillion nationally, making it the second highest consumer debt after mortgage, according to Forbes. About 11 percent of this debt is delinquent. Under the federal College Cost Reduction and Access Act of 2007, law school graduates who have spent more than 10 years in public service and made 120 monthly loan repayments qualify for loan forgiveness. But nationwide, over 99 percent of forgiveness applications are turned down because of strict requirements, according to Forbes. The new bill of rights aims to address some servicing companies’ predatory practices by requiring loan servicers to register with the state and setting standards for how servicers communicate with customers.

Humm is optimistic that the bill of rights will hold servicing companies accountable for their inaccessible communication channels. She estimated that she has spent 35 to 50 hours on the phone with FedLoans Servicing over the course of five years. “There was no one to talk to that could help you,” she said.

Scott Buchanan, executive director of the Student Loan Servicing Alliance, a coalition of servicing companies nationwide, wrote in an email to The Herald that most borrower complaints concerned issues determined under federal law, such as interest rates and repayment options. The national Alliance does not include FedLoan Servicing.  “Most challenges are with rules … under which we all have to work,” Buchanan wrote.

While the student loan bill of rights aims to protect borrowers who, like Humm, should qualify for debt forgiveness, it also extends beyond that group to anyone who takes out student loans to attend university in Rhode Island by increasing transparency for servicing companies across the board, said bill sponsor Sen. Dawn Euer, D-Newport. “We’re at a crisis point with student loans in this country,” she said. Euer added that the high rejection rate for loan forgiveness applications indicates “a problem with the status quo.”

The Rhode Island Office of the General Treasury supported this bill. “This is something we take very seriously,” said Evan England, a spokesperson for the Treasury.

The Association of Independent Colleges and Universities of Rhode Island, which represents and lobbies on behalf of the state’s private universities, also supported the bill. Brown is a member of AICU of Rhode Island. According to Dan Egan, president of the Association of Independent Colleges and Universities of Rhode Island, the legislation will impact students at all Rhode Island universities equally. It is necessary to address the “uncertainty around the efficiency of the federal pathway” for addressing borrowers’ complaints, he added.

The University Loan Office  did not respond to multiple requests to comment.

Correction: A previous version of this article stated that Kara Humm visited the office of Sen. Sheldon Whitehouse. In fact, she visited the office of Sen. Jack Reed. The article also stated that the Rhode Island Office of the General Treasury rarely weighs in on policy, but the Treasury actually does tend to lobby for policy.

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