D.C. lawmakers say student loan debt is treated differently than any other debt, with predatory lenders targeting young borrowers who oftentimes don’t know their options or what terms to look for.
Council members are hearing from the public and experts about how to craft legislation to protect borrowers.
Experts and members of the public testified to the Committee on Business and Economic Development and the Committee on Judiciary and Public Safety on the Student Loan Borrower Bill of Rights Act of 2021, introduced in March.
“This event is truly life-changing for my family. The burden of student loan debt can be emotionally debilitating. I’m even getting emotional just reading this to you,” Ward 7 resident Jane Anderson said in reading her testimony before council members.
The D.C. Public Schools employee said she had to rely on loans to afford her graduate degree in business, and over time, she accrued $70,000 in interest on the loan. In Anderson’s case, a city student loan ombudsman was able to successfully advocate for her.
“My student loan balance of $211,000 was forgiven,” she said with relief.
Council member Christina Henderson underscored that the aim of the Student Loan Borrower Bill of Rights is to prohibit unfair, deceptive or abusive lender practices; require notification of the borrower if loans are transferred or sold; and extend existing consumer protections to borrowers.
The bill would provide for automatic licensing of federal student loan servicers that eliminates the preemption concern. Similar legislation has been implemented in several states, according to the D.C. Attorney General’s Office.
“The way that it is drafted, it is not just to protect those who are going to community colleges or state schools or four-year institutions, but it is also to capture this very growing very real for-profit market that a lot of people don’t think about,” Henderson said.
Ward 6 resident McKenzie Kuhl testified she was working two jobs and doing all she could to pay off private loans after she graduated in 2019 to cover her $70,000 in student loan debt. She said she was barely making ends meet with monthly payments exceeding $900.
“I thought it was something everyone had to do, which is just a complete lie. So I just went with it. I had no idea of the postgraduate implications it would have on me, and I know other students who have had it even worse,” Kuhl said.
Council member Charles Allen sympathized with borrowers, saying his family must also make decisions based on its student loan obligations.
“I’m not sure I can think of a year that I will not be making a student payment, either for myself or my wife or for my kids. I don’t know. I don’t see when that ever ends. And it can be incredibly daunting and distressing,” Allen said.
Both Anderson and Kuhl found relief in working with DISB Student Loan Ombudsman Ricardo Jefferson for free. Commissioner Karima Woods, who runs the District of Columbia Department of Insurance, Securities and Banking, said the student loan ombudsman program is focused on helping residents in the city’s most underserved communities with navigating financial challenges and educating them on borrowing before they begin their degree programs.
The program also helps borrowers apply for loan forgiveness depending on their circumstances.
“In FY 20, the ombudsman resolved $3.7 million worth of resident complaints and controversies and in FY 21, the ombudsman investigated 33 complaints, totaling $2.56 million. These complaints overwhelmingly involve federal loans, and the single-largest area of concern for the residents was the modification of federal student loan repayment based on change and income,” Woods testified.
When student loan payments were paused during the pandemic, many borrowers were confused about when payments would begin again and took issue with the lack of communication from lenders.
“We’ve received almost 2,000 complaints from District residents about student loan servicing. We received hundreds of complaints during the student loan payment pause alone. So this is at a time when borrowers are learning they’re required to make payments, and so this shows that there absolutely is a need,” Ashley Harrington, with the Federal Student Aid, told lawmakers.