D.C. Council members say they’re considering legislation that would ensure District residents have their consumer rights respected as student loan borrowers.
On Oct. 25, the Committee on Business and Economic Development and the Committee on Judiciary and Public Safety held a joint hearing on the New Student Loan Borrower Bill of Rights Amendment Act of 2021.
Authored by Council member Christina Henderson (I-At Large), the bill would ban unfair, deceptive or abusive lending practices, require servicers to tell borrowers if loans are transferred or sold, and extend present consumer protections to borrowers. In addition, the bill transfers the responsibility of dealing with student loan matters from the D.C. Department of Insurance, Securities and Banking to the D.C. Office of the Attorney General and puts in place a mechanism to oversee private lenders.
Henderson introduced the bill with Robert White (D-At Large), Anita Bonds (D-At Large), Elissa Silverman (I-At Large), Brianne Nadeau (D-Ward 1), Brooke Pinto (D-Ward 2), Mary Cheh (D-Ward 3), Janeese Lewis George (D-Ward 4) and Charles Allen (D-Ward 6) as co-introducers on March 29.
The council chose to review the bill as studies reveal District residents have a high level of student loan debt. AdvisorSmith, a business research company based in New York City, published on its website in January that the District has the highest balance of student loan debt in the country with $54,982. Additionally, the District leads the nation with 16% of residents having unpaid student loan debt.
Student Loan Debt Issues
Council member Kenyan McDuffie (D-Ward 5), who chairs the Business and Economic Committee, said racial inequities exist in the District’s student loan debt dilemma.
“Nationally and locally, the highest and fastest student loan balances are in majority-Black communities,” McDuffie said. “Parts of Ward 5 and east of the Anacostia River neighborhoods have the city’s highest delinquency loan defaults. Loan default rates in Congress Heights, Deanwood, Anacostia and Brentwood are 35%, 31%, 31% and 23%, respectively.”
McDuffie said, in comparison, default rates in predominantly-white neighborhoods DuPont Circle, Chevy Chase and Capitol Hill are much less. He said, quoting advocates of student loan reform, that Black borrowers with a bachelor’s degree are five times more likely to default than whites with the same degree.
The council member said “the District faces broader challenges of attracting teachers, public interest attorneys and government experts who often take on high levels of student loan debt with comparably lower pay levels.”
McDuffie said the coronavirus pandemic exacerbated the student loan debt crisis.
“The pandemic only added to the paying students, their parents and older working adults as our national and local economy contracted,” he said. “Not only did our neighbors lose jobs but they also lost income and in many cases, the ability to pay debt including student loans. This as we know prompted the federal government to defer payments on federal student loan debt through January 2022.”
Henderson agreed with McDuffie that residents of color are hurting financially due to unchecked student loan practices.
“The bottom line is Black and Brown borrowers struggle the most with student loan debt and by extension are at the most risk when loan servicers and lenders engage in unfair practices to collect debt,” Henderson said. “We’ve heard plenty of examples of this with private lenders charging hidden fees, using unclear language about discharge eligibility or payment options and borrowers and cosigners sometimes receiving inconsistent information with bait and switch issues when it comes time to remove cosigners off of a loan obligation.”
Thoughts on the Student Loan Bill
Winston Berkman-Breen, deputy director of advocacy and policy counsel at the Student Borrowers Protection Center in the District, supports the bill.
“The bill provides common-sense protection for borrowers,” Berkman-Breen said. “About one in six District residents have student loans totaling over $7 billion but the District currently lags behind in consumer protection.”
However, Christine Roberts, the head of student lending at Citizens Bank, expressed doubts about the legislation.
“Unfortunately, our ability to continue to provide low-cost private education loan options to D.C. students attending colleges in your District and elsewhere will be jeopardized by this bill as currently drafted,” Roberts said. “The bill does not include meaningful exemptions to federally regulated banks, setting up unmanageable conflicts with our various other regulators and therefore we ask that you pause on passing this legislation until modifications can be made.”
Sonya Daniels, a resident of Ward 1, thinks the bill should become law because “it is a step in the right direction in helping people with their student loans.”
“I am so glad the council is doing something to help me deal with these student loans,” she said, noting she owes $60,000 for undergraduate and graduate loans. “I have been on deferment since last year and I know I face a big bill next year when I start repaying it. I need all of the help I can get.”