Fewer Rights, Fewer Protections: Reflections on the Lack of Safeguards in Student Lending

By Ben Kaufman | December 5, 2019

For millions of Americans, student loans are the largest and most significant financial product they will use in their lifetime. The average student loan balance is now more than $33,000, a 60 percent increase from only a decade ago. Over the same brief period, the share of household balance sheets consumed by student debt has more than doubled.

But while policymakers strengthened consumer protections for most credit products in the wake of the financial crisis, the rights of student loan borrowers continue to lag far behind. At every step of the lending and repayment process, 44.7 million American student loan borrowers still lack the same basic rights enjoyed by consumers of credit cards, mortgages, and other common financial products.

By creating robust, comprehensive, and independently enforceable rights and consumer protections, Congress can take a meaningful step in addressing our $1.6 trillion student debt crisis.

We have long known that predatory actors regularly take advantage of the lack of guardrails in the student loan market. Time and again, we have seen borrowers get ripped off by debt collectors, servicers, private lenders, and more—all looking to make a quick buck. This magnifies a domino effect that ripples across financial lives as people delay or give up on dreams of starting families, opening businesses, buying homes, or even simply saving for retirement. It is a status quo that policymakers would hardly accept in any other market or industry.

Luckily, a growing chorus of voices from across the political spectrum and policy landscape has begun to demand change. Drawing on statements from President Obama to Treasury Secretary Steven Mnuchin, from federal lawmakers to state law enforcement officials, and from academics to financial institutions, we’ve compiled the following index of key statements from the diverse range of voices speaking out about the need for comprehensive student borrower protections.

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Over the last decade, Congress has stepped up to help consumers avoid tens of billions of dollars in credit card fees, keep tens of thousands of families in their homes, and build a new regime of clear rules and responsibilities for the $175 billion remittance market

If you have a mortgage, you have legal rights under the Real Estate Settlement Procedures Act for when your paperwork gets lost in a servicing transfer. If you have a credit card, you have protections through the Credit Card Accountability Responsibility and Disclosure Act for when you are overcharged based on “gotcha” fine print.

Given the broad support we document for increased student borrower protections, Congress should act to offer similar safeguard for those who dared to chase the American Dream through higher education. By creating robust, comprehensive, and independently enforceable rights and consumer protections, Congress can take a meaningful step in addressing our $1.6 trillion student debt crisis.

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Ben Kaufman is a Research & Policy Analyst at the Student Borrower Protection Center. He joined SBPC from the Consumer Financial Protection Bureau, where he worked as a Director’s Financial Analyst on issues related to student lending.