Trump Administration’s Failure to Protect Student Loan Borrowers Underscores Need to Pass California Borrower Bill of Rights
New Lawsuit Filed Against CFPB, Dept. of Ed Shows Lack of Federal Oversight of Student Loan Companies Puts Student Loan Borrowers At Risk
SACRAMENTO, CA–Earlier this week, Student Loan Reform Advocates sued the Trump administration for shirking their legal obligation to supervise large student loan servicers, specifically those servicing federal loans. Given growing evidence of widespread predatory practices across the student loan industry as federal regulators are charged with failing to to their job of protecting borrowers, the organizations co-sponsoring AB 376, the California Student Borrower Bill of Rights, are doubling down on their call to the state legislature to pass this critical borrower protection legislation.
With federal regulators refusing to oversee student loan companies, the need for states to step in to protect borrowers is more important than ever. The lawsuit announced yesterday against Trump-appointed Secretary of Education Betsy DeVos and CFPB Director Kathleen Kraninger and their respective agencies, alleges that the CFPB has failed to do its job and protect borrowers–abandoning its obligation under federal regulations. Collectively, the agencies’ actions effectively leave 81% of student loan debt without proper federal oversight.
To further amplify the call for the California State Legislature to protect borrowers by passing AB 376, the organizations have announced the Free My Future Student Loan Debt Week of Action intended to raise awareness around the student debt crisis.
Pushing Back Against Special Interests Working to Derail Borrower Protections
Reports suggest big banks, student loan companies, and special interests are working behind the scenes to derail important borrower protections and evade scrutiny by state government watchdogs. Some of these same companies are the ones benefiting from the CFPB and Department of Education’s attempts to shield industry from oversight and accountability. A look back at industry practices in the student loan market shows a track record of borrower abuse and underscores why California lawmakers must act to increase protections for borrowers and boost transparency and oversight of the market.
Protecting California Borrowers
AB 376, the California Student Borrower Bill of Rights, will create new rights for all California borrowers, and establish special protections for military families, nurses, teachers, and other public service workers. The legislation would require student loan companies to train their staff to understand these rights and creates strong new protections to prevent companies from deceiving teachers and public service workers and misleading military borrowers. This bill also creates new penalties for companies that trick borrowers out of their repayment rights and, for the first time, gives individual borrowers new legal tools to seek justice for these abuses in the courts.
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California is positioned to pave the way in the fight to protect borrowers:
Natalia Abrams, Executive Director, Executive Director of Student Debt Crisis:
“Earlier this week, we filed a lawsuit to send a clear message to the Trump Administration: the federal government is breaking the law by ignoring student loan industry abuses. With over a trillion dollars of student debt left unregulated by federal watchdogs, stronger consumer protections are absolutely necessary. We are proud to join a coalition of consumer advocates in supporting the passage of AB 376, the California Borrower Bill of Rights.”
Seth Frotman, Student Borrower Protection Center Executive Director and former CFPB student loan ombudsman:
“This week’s lawsuit is yet another reminder that the federal government is ignoring widespread industry abuses. Federal inaction is letting predatory companies harm student borrowers and is leaving a trillion dollar blind spot in the market. That’s why the passage of AB 376, the California Borrower Bill of Rights, is so vital. Millions of Californians deserve protection and rights–this legislation will ensure that they do.”
Kristin McGuire, Western Regional Director for Young Invincibles:
“The Trump Administration has an obligation to defend borrowers against deceptive lenders by holding lenders accountable for their actions — but they’ve fundamentally failed in that duty. Rather than ensuring young people have the supports they need to afford their education, they’ve pulled the rug from underneath America’s borrowers and emboldened predatory lenders who continually mislead young people for their own gain. That’s why it’s so important to ensure the Trump Administration holds up its end of the bargain and protects borrowers against abusive lenders.”
Suzanne Martindale, Senior Policy Counsel & Western States Legislative Manager, Consumer Reports:
“It is troubling that the CFPB and Department of Education show little to no interest in protecting student borrowers, especially when so many are struggling unnecessarily because of loan servicing failures. California must lead the nation forward to fix the student debt crisis by promptly passing AB 376.”
Arnold Sowell Jr., Executive Director, NextGen California:
“Under the Trump administration, the student loan servicing industry has gone unregulated with no proper government oversight for far too long. The CFPB and the Department of Education have a responsibility to protect the millions of student loan borrowers and not leave them in the hands of predatory student loan servicing companies. In California, we are determined to ensure that people are prioritized over corporate profits and that is why we must pass the Student Borrower Bill of Rights (AB 376). All student loan borrowers deserve clear and transparent consumer protections and the opportunity to pursue the promise of higher education without the fear of long-term financial insecurity.”
The California Student Borrower Bill of Rights
The Student Borrower Bill of Rights was authored by Assembly Member Mark Stone (D-Monterey Bay), and is co-sponsored by the Student Borrower Protection Center (protectborrowers.org), Consumer Reports Advocacy (advocacy.consumerreports.org), NextGen California (ca.nextgenamerica.org), Student Debt Crisis (studentdebtcrisis.org), and Young Invincibles (younginvincibles.org).
Earlier this year, the legislation’s co-sponsors joined with dozens of other organizations representing students, workers, consumers, older Americans, communities of color, and veterans to launch the Campaign for California Borrowers Rights (www.californiaborrowers.org) to advocate in support of this legislation and to fight to end the student debt crisis in California.
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The Student Borrower Protection Center is a nonprofit organization focused on alleviating the burden of student debt for millions of Americans. SBPC engages in advocacy, policymaking, and litigation strategy to rein in industry abuses, protect borrowers’ rights, and advance economic opportunity for the next generation of students. Led by the team of former federal regulators that directed oversight of the student loan market at the Consumer Financial Protection Bureau, SBPC exposes harmful and illegal practices in the student loan industry, drives impact litigation, advocates on behalf of student loan borrowers in Washington and in state capitals, and promotes progressive policy change. SBPC accomplishes these goals by partnering with leaders at all levels of government and throughout the nonprofit sector.
Young Invincibles (YI) is a national nonprofit, non-partisan advocacy and research organization working with and for young adults to address the generation’s most pressing economic challenges by amplifying the voices of young adults in the political process. With a focus on higher education, health care, workforce development, and civic engagement, our work is guided by the belief that every young person – regardless of race, gender, socioeconomic status, or any other factor – deserves a fair chance to achieve their goals and reach financial stability.
Student Debt Crisis is a non-profit (501c4) organization dedicated to fundamentally reforming student debt and higher education loan policies. Student Debt Crisis (SDC) takes a personal approach to member needs—working directly with borrowers to understand their challenges and fears, repayment obstacles and frustrations. SDC tackles the challenges of loan refinancing and consumer protection policies with media and legislators, as well as educating borrowers and higher education experts with lectures, webinars and special events.
Consumer Reports is an expert, independent, non-profit organization whose mission is to work for a fair, just, and safe marketplace for all consumers and to empower consumers to protect themselves. Consumer Reports works for pro-consumer policies in the areas of financial services, as well as telecommunications, health care, food and product safety, energy, telecommunications, privacy and data security, and competition and consumer choice, among other issues, in Washington, DC, in the states, and in the marketplace. Consumer Reports is the world’s largest independent product-testing organization, using its dozens of labs, auto test center, and survey research department to rate thousands of products and services annually. Founded in 1936, Consumer Reports has over 6 million subscribers to its magazine, website, and other publications.
NextGen California is a non-profit organization dedicated to working on legislative, budgetary, regulatory, and programmatic issues. Originally founded in 2014 to focus on climate and environmental policy, in recent years, NextGen California has broadened its scope to advance solutions to various economic, and social justice issues. Specifically, our policy portfolio now encompasses topics such as: criminal justice and immigration; healthcare and food insecurity; mental health and voting rights; student loan debt and the Census; veterans issues and consumer protections; and affordable housing and environmental justice.