The Massachusetts state Senate passed a Student Loan Bill of Rights on Wednesday meant to protect student loan borrowers. The move pushes back on the federal government, which has opposed the crafting of such state laws.
The proposed Massachusetts law requires loan servicers to obtain a license to operate within the state. It also creates an ombudsman tasked with monitoring loan providers and handling borrower complaints.
The bill, which has attracted bipartisan support, still must be passed by the state House and signed into law by the governor. If enacted, the new law will join a growing list of state regulations imposing stricter rules on the student loan industry.
Connecticut became the first state to pass a Borrowers’ Bill of Rights in 2015, which served as a model for legislation in 14 other states and in Washington, D.C. That’s according to Higher Ed, Not Debt, a campaign launched by various advocacy and labor groups to address the student debt crisis.
However, Massachusetts’ law is notable because it’s the first headed toward passage since the Department of Education published a notice in the federal registrar asserting that conflicting federal laws make such state regulations unenforceable.
Continuing conflict between state and federal authorities isn’t limited to the regulation of loan servicers. Several states have also moved to provide in-state tuition to “Dreamers,” a term given to undocumented immigrants brought to the U.S. as children. Such moves come even as the Trump administration has rolled back protections for Dreamers.
States get strict with the student loan industry
Massachusetts’ student loan bill, which passed the Senate by unanimous vote, gives authority to a newly created student loan ombudsman to provide borrower education, resolve disputes between borrowers and lenders, and review how student loan servicers operate. The state attorney general’s office is also empowered to act against loan servicers that violate new laws.
It follows on the heels of legislation passed in Illinois and Washington, D.C., in 2017. These, along with the Connecticut law, imposed licensing requirements to force loan servicers to comply with stricter state rules.
California, Colorado, Maine, Missouri, New York, Virginia, and Washington have also either introduced or passed legislation since 2015 extending more protections to borrowers. A bill is also under consideration in Maryland.
Several of these laws, including regulations in Connecticut and Washington, D.C., have led to court challenges, with loan servicers claiming state regulations are in conflict with federal laws. The Department of Education has sided with lenders, arguing that states are overstepping their authority because federal laws preempt state regulations.
The Trump administration’s position marks a change from guidance issued by the Obama administration in 2016, which said states were free to impose stricter rules on loan servicers.
Maryland’s bill was under debate at the time the Department of Education published its notice. This led the state to strip the licensing requirements from the proposed law, according to MarketWatch. Massachusetts, on the other hand, chose to push forward with its licensing mandate despite the Department of Education’s views.
“The federal government is asleep at the switch and is actively trying to dismantle really basic protections,” said Eric Lesser, the Massachusetts state senator who introduced the borrower protection bill. “In the absence of federal efforts, the states must step up to fill the gap.”
New Jersey, others seek to help undocumented students
States are also moving bills forward to provide broader access to education for Dreamers protected under the Deferred Action for Childhood Arrivals (DACA) program, setting up another potential conflict with the federal government.
The New Jersey assembly approved a measure on Thursday to make undocumented students eligible for college financial aid, beginning in the fall semester. The bill is headed to Gov. Phil Murphy, who campaigned in support of offering in-state financial aid to Dreamers.
New Jersey joins a growing list of states offering educational aid to students regardless of immigration status. There are 20 states providing in-state tuition for qualifying undocumented students, according to the National Conference of State Legislatures.
Like New Jersey, California, New Mexico, Minnesota, Texas, and Washington have made state financial assistance available for undocumented students. Other states, including Utah, permit private funding sources to make financial aid available. And there have also been recent efforts in Tennessee to provide discounted in-state tuition to DACA recipients.
However, federal aid remains unavailable to undocumented students under current law. Further, the Illegal Immigration Reform and Immigrant Responsibility Act of 1996 might prohibit states from providing postsecondary education benefits to undocumented immigrants on the basis of residency unless all U.S. citizens and nationals are eligible for the same benefits.
Laws aimed at making college affordable for undocumented immigrants have also been challenged in court. The Arizona Supreme Court recently struck down the state’s law allowing DACA students to pay in-state tuition rates. It ruled that the state’s current laws do not permit Arizona universities and colleges to charge in-state tuition for students without permanent legal status.
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1 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 6.97% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 6.23% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of Month/Day/Year, and are subject to change based on market conditions and borrower eligibility.
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2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
Savings example: average savings calculated based on single loans refinanced from 9/2013 to 12/2017 where borrowers’ previous rates were disclosed. Assumes same loan terms for previous and refinanced loans, and payments made to maturity with no prepayments. Actual savings for individual loans vary based on loan balance, interest rates, and other factors.
Application detail: 5 minutes indicates typical time it takes to complete application with applicant information readily available. It does not include time taken to provide underwriting decision or funding of the loan.
Instant rates mean a delivery of personalized rates for those individuals who provide sufficient information to return a rate. For instant rates a soft credit pull will be conducted, which will not affect your credit score. To proceed with an application, a hard credit pull will be required, which may affect your credit score.
Total savings calculated by aggregating individual average savings across total borrower population from 9/2013 to 12/2017. Individual average savings calculation based on single loans refinanced from 9/2013 to 12/2017 where borrowers’ previous rates were provided. Assumes same loan terms for previous and refinanced loans, and payments made to maturity with no prepayments. Actual savings for individual loans vary based on loan balance, interest rates, and other factors.
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4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
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