State Protections for Student Loan Borrowers: What to Know

States have been paying increasing attention to student loan borrowers in recent years. In response to rising student loan debt balances, at least 13 states have enacted laws since 2015 to expand oversight of student loan lenders and servicers, and many states have created resources to protect student loan borrowers, according to the National Conference of State Legislatures, or NCSL.

The details of these laws and regulations vary widely between states. Concerned about the negative effects of high student loan debt, many states — starting with Connecticut — have implemented a student loan borrower “bill of rights” or have passed laws aiming to regulate federal student loan servicers, the companies that the federal government hires to manage loan repayment.

These laws also often create a new resource for borrowers through a state-specific ombudsman office, which is responsible for fielding complaints and helping borrowers who have questions or trouble with their student loans. You can see whether your state has a student loan ombudsman or advocate and find contact information via the National Consumer Law Center’s Student Loan Borrower Assistance Project.

[Read: How to Work With a Student Loan Ombudsman.]

While the vast majority of student loans are made and overseen by the federal government, many states still see a role for themselves in providing information and assistance to borrowers in their states or, in some cases, in overseeing federal student loan servicers. There is some disagreement about whether states have such authority over federal contractors, an issue currently being litigated.

State laws relative to student loans have similar goals but can take different forms, depending on the state. Many states are requiring student loan servicers to be licensed with the state and to follow additional regulations on top of what is required by their federal contracts.

Laws passed in some states, like Massachusetts, include provisions that allow the state to file lawsuits against federal student loan servicers. You can find out more about what your state is doing in terms of addressing student loans by checking out the Student Loan Bill Tracking Database maintained by the NCSL. The tool, which is updated monthly, includes information about enacted, pending and failed state legislation regarding student loans since 2015.

In addition to regulatory efforts, some states are creating programs to help borrowers manage their debt via refinancing or targeted loan forgiveness programs. For example, New York’s NYS Get on Your Feet Loan Forgiveness Program covers up to two years of federal student loan payments for state residents who earned an undergraduate degree from a New York college or university in or after December 2014, have an adjusted gross income of less than $50,000 and are enrolled in an income-based repayment plan, among other criteria.

[Read: What to Know About Federal Student Loan Repayment Options.]

In 2020, more than 30 states introduced 108 bills related to student loan forgiveness, according to the NCSL. The year before, legislators in 18 states — including Colorado, Texas, Hawaii, New Hampshire and Utah — enacted more than 30 such bills.

Though these programs vary in scope and funding, they typically provide some type of student loan subsidy or forgiveness to those who agree to live or work in certain regions of the state and who follow certain parameters. Many programs are created with the goal of attracting or retaining residents, or incentivizing graduates to work in certain fields such as education, technology and health care.

Some states have also created state-based loan refinancing programs that allow borrowers to refinance their student loans at lower interest rates. These programs, which are often run through state student loan authorities, have varying terms and rates. One such program, run by the Rhode Island Student Loan Authority, offers income-based repayments for its refinance loans and is open to eligible borrowers in any state for eligible loans used at a college in any state.

It’s important to carefully consider whether you should refinance your student loans. By refinancing federal student loans with a private lender, you lose protections that come with the federal program, including income-driven repayment options and federal loan forgiveness programs.

[Read: How to Prepare and Qualify for Student Loan Refinancing.]

The interest rate for most federal student loans is set at 0% through Sept. 30 as part of the federal coronavirus pandemic relief, so now is not a good time to refinance those loans into the private market. For borrowers looking to refinance private student loans, it’s smart to compare the terms and conditions of your current loan with those of new loans and make sure you’re getting the best deal.

In addition to finding help from your state, you can turn to federal resources such as a federal student loan ombudsman or to a consumer advocacy organization that works on behalf of student loan borrowers. It’s also important to know who your student loan servicer is and keep track of your repayment options and when you may need to make a strategic change.

Even if you can’t afford to make your monthly student loan payments, there are ways to stay in good standing on your loans and avoid the harsh consequences of default. Be sure to reach out for help if you need it, and know that there are lots of resources available — including possibly in the state where you live.

More from U.S. News

When to Contact Your Student Loan Servicer

How Borrowers Can Use the Public Service Loan Forgiveness Help Tool

Student Loan Default: What to Know

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