A new law sponsored by Sen. Dawn Euer and Rep. Joseph M. McNamara will protect student loan borrowers and establish oversight of student loan servicers operating in Rhode Island. The legislation, which was backed by General Treasurer Seth Magaziner and Attorney General Peter F. Neronha, took effect as soon as it was signed by the governor July 15, after passage by the General Assembly in June.
“By several measures, student loan debt has increased greatly in the last 10 years,” said Representative McNamara (D-Dist. 19, Warwick, Cranston), chairman of the House Committee on Health, Education and Welfare in a prepared statement. “It has surpassed the amount households owe on auto loans, home equity loans and credit cards. This legislation will help to address the crisis by establishing oversight of the student loan process and prohibiting predatory practices.”
Said Senator Euer (D-Dist. 13, Newport, Jamestown) in a prepared statement, “The heavy burden of student debt is challenging enough for the majority of college graduates. Incompetent, inefficient or even deceitful loan servicers should not be allowed to exacerbate their struggles. Student loan servicers must be held accountable to ensure that they are providing honest, reliable information and services to their borrowers.”
The legislation (2019-S 0737A, 2019-H 5936A), titled the Student Loan Bill of Rights, sets standards for student loan servicing, both prohibiting predatory behavior and providing best practices for protecting consumers’ rights. It requires that student loan servicers register with the state and allows state regulators to examine servicers’ business practices. Additionally, the new law allows the Attorney General and Department of Business Regulation to penalize servicers who violate borrower rights and to seek restitution on behalf of borrowers in Rhode Island.
Borrowers in Rhode Island report being double-charged or incorrectly marked as delinquent in payment, with loan servicers taking months or even years to correct mistakes. Additionally, many student loan borrowers eligible for the national Public Service Loan Forgiveness program have received incorrect and contradictory information from their loan servicers, leading to improper denials of loan forgiveness.
“There is a growing student debt crisis in the country and in Rhode Island. There are borrowers who do everything right and still fall victim to predatory and deceptive practices by the corporations that service their loans,” said Treasurer Magaziner in a statement. “The Rhode Island General Assembly passed our common-sense legislation that will hold servicers accountable and provide an important resource for Rhode Islanders who are paying off student loans.”
Said Attorney General Neronha in a statement, “If and when borrowers have issues with their loans or loan servicers, this legislation provides them with a place to go to address those issues. While our primary focus will be on helping Rhode Islanders get the information they need to solve their student loan problems, my office will be ready, on behalf of mistreated borrowers, to investigate and enforce violations of the student loan standards outlined in this bill.”
More than 133,000 Rhode Islanders, including 16,000 senior citizens, have a combined $4.5 billion in student loan debt. Over $470 million of Rhode Islanders’ student loan debt is delinquent.