Measure Helps Schools Promote State-Backed Private Lenders With Long History of Scandals and Aggressive Debt Collection Practices, Without Ensuring Products are in Best Interest of Students

July 30, 2026 | WASHINGTON, D.C. — Today, the United States Senate Health, Education, Labor and Pensions (HELP) Committee voted to advance S. 4097, the State-Based Education Loan Awareness Act, which would make it easier for colleges to promote certain state-backed private lenders without having to comply with preferred lender rules. These rules were established nearly 20 years ago in response to high-profile scandals where multiple lenders (including state-based, non-profit lenders) were paying kickbacks to schools in exchange for being included on preferred lender lists. The rules require schools to follow common sense procedures to protect students from these types of abuses and conflicts of interest and ensure that they are only advertising loan options that are in the best financial interest of their students.

By passing S. 4097, the Senate HELP Committee carved out an entire sector of private lenders who have been found deploying aggressive debt collection practices against borrowers who fall behind—including going after the parents of deceased students, suing thousands of students, garnishing wages and state tax refunds, and even revoking professional licenses. Ahead of the markup, Protect Borrowers led a coalition letter on behalf of over a dozen labor, civil rights, student, and consumer protection groups opposing the bill.

In response, Protect Borrowers Policy Director Aissa Canchola Bañez released the following statement:

“It is becoming clearer every day to American families that the OBBBA’s promise to lower college costs was a lie. As a result, amidst an ongoing affordability crisis, students are struggling to figure out how they will pay for their education. Today, instead of reversing these cuts and working to actually make college affordable, senators from both parties rammed through another giveaway to the private student loan industry and set up students to go deeper into debt.

“As students and families are forced to rely on the private loan market to cover their financial aid gaps, it is simply inexcusable for senators to give state-based private lenders and college officials a free pass to cut deals that are not in students’ best interest.

“Families are demanding lower costs, not more predatory debt. Policymakers in both parties should take note and must remember the lessons of the past when schools too often sold out their own students in order to pad their bottom lines.”

Further Reading

Read our letter on behalf of a coalition of over a dozen labor, civil rights, students and consumer protection groups opposing S. 4097: https://protectborrowers.org/wp-content/uploads/2026/07/S-4097-Opposition-Letter.pdf 

Read our blog on how S. 4097 will make it easier for schools to load students up with state-based private student loan debt: https://protectborrowers.org/congress-wants-to-make-it-easier-to-load-students-up-with-state-based-private-student-loan-debt/ 

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