After borrowers say they were scammed, Minnesota lawmakers want tougher rules for student loan managers
Rep. Zack Stephenson, R-Coon Rapids and Sen. Zach Duckworth, R-Lakeville on Monday, February 22, put in place a plan to require student loan managers to be licensed from the state. Administrators would face civil penalties and revocation of their license if they mislead borrowers or misrepresent their services.
The couple said their so-called “Student Borrower Bill of Rights” could add extra strength to state law to deter companies from entering into loan deals with Minnesotans and then shifting the stakes onto them. without their approval. In Minnesota, approximately 775,000 residents hold student loans. And combined, the loans total $ 27 billion.
Under the proposal, managers would have to apply for a license from the Department of Commerce and be prohibited from misleading borrowers, misrepresenting their services, or improperly enforcing loan payments as conditions of remaining in good standing with the State. It does not describe a clear recourse for the borrower.
“Minnesota law is woefully inadequate in protecting student borrowers from the most basic bad behavior of private companies servicing their debt,” Stephenson said. “If the borrower takes the slightest misstep, he can see his debt skyrocket and suddenly become ineligible for the forgiveness programs he may have planned his entire education on.”
This is what happened to Destiny Belmont, a school psychologist in the Benton-Stearns Education District. Belmont took out about $ 50,000 in loans to help pay for his graduate studies at Minnesota State University Moorhead. His loan officers then changed his policies without telling him and made it difficult for the federal government to forgive him his debts after nearly a decade of repayment.
“Loan managers are taking advantage of the Minnesotans, many of whom – like me – are turning to education, health care and other public services, ”Belmont said. “It’s time to regulate loan managers and represent the interests of borrowers, not businesses.”
The bill was due to be presented for its first committee hearing on Tuesday. The Senate and House of Representatives will need to approve the plan before it can go to Governor Tim Walz’s office for signature.
Stephenson and Duckworth said they were confident the measure could win support on both sides of the political aisle on Capitol Hill.
“Slowly but surely, I hope we can have a more lasting impact on this process,” Duckworth said. “I think this is a great place to start.”
Follow Dana Ferguson on Twitter @bydanaferguson, call 651-290-0707 or email email@example.com