Rhode Island has enacted a student loan bill of rights to protect borrowers from deceptive lending practices.
The law took effect with the governor’s signature last week. Treasurer Seth Magaziner said Thursday it provides important protections for student borrowers and makes it easier to hold loan servicing companies accountable for abusive behavior.
“Rhode Islanders are struggling to keep up with their student loan payments, due in part to deceptive and abusive practices by loan servicing companies,” he said in a statement.
The law sets standards for student loan servicing to prohibit predatory behavior and provide best practices for protecting consumers’ rights. It requires that student loan servicers register with the state and allows state regulators to examine their business practices. The attorney general and Department of Business Regulation can penalize servicers who violate borrower rights and seek restitution on behalf of borrowers.
More than 133,000 Rhode Island residents, including 16,000 senior citizens, have a combined $4.5 billion in student loan debt, according to Magaziner’s office. About $470 million of that is delinquent.
Kara Humm, 38, of Barrington, Rhode Island, works as a staff attorney with the public defender’s office in Fall River, Massachusetts. She said that trying to get her loans forgiven through a program for people working in public service has been “frustrating and exasperating.”
She said that she does what she’s told and then is told it’s wrong, and that she can’t get solid information about how to get the rest of her law school debt forgiven now that she has worked in public service for more than 10 years.
“We need to have somebody who borrowers can go to within the state to advocate for them, and I’m hopeful it’ll make these servicing companies accountable for their actions,” she said Friday.
Rhode Island joins growing efforts among states to protect those who take out student loans, though the Trump administration has discouraged states from regulating student loan servicers. The U.S. Department of Education has said that only the federal government can oversee the student loan program.
Democratic Rep. Joseph McNamara and Sen. Dawn Euer sponsored the legislation.
McNamara, of Warwick, said it’s a tool to help address the student loan debt crisis. Euer, of Newport, said student loan servicers must be held accountable to ensure they are providing honest, reliable information and services to their borrowers.
Magaziner and Attorney General Peter Neronha asked lawmakers to pass the legislation, with support from Rhode Island’s commissioner of postsecondary education.
Neronha said that while the primary focus will be on helping residents get the information they need to solve their student loan problems, his office is ready to investigate and enforce violations of the new standards.