When it comes to tackling the $1.5 trillion student loan crisis, lawmakers and consumer advocates say it's time to give student borrowers more protections from the for-profit companies in charge of servicing this loan industry.
On Tuesday, Sep. 10, the House Financial Services Committee took on student lending and its ramifications for the 45 million Americans borrowers. Both Democrats and Republicans on the committee agreed there are problems with the current student lending system. Specifically, lawmakers and consumer advocates criticized student loan servicing companies such as Navient, saying that student borrowers need more assistance and protections from these for-profit corporations.
"Congress – and this committee – have a responsibility to take action to ensure student loan borrowers are better protected," Chair Maxine Waters (D-Calf.) said Tuesday.
And it's not just lawmakers who are calling for change. Comedian Hasan Minhaj, host of the Netflix show "Patriot Act," urged the committee to take action to protect borrowers. "Americans should not have to go bankrupt to pursue higher education, and they should never be preyed upon by under-regulated loan servicing companies," Minhaj said.
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Seth Frotman, executive director of the Student Borrower Protection Center, says that student loan borrowers have a "bullseye" on their back and are subjected to "predatory tactics" from servicing companies from the day they take out their loan until the day they pay it back.
He claims that's because student borrowers have less rights than nearly any other type of borrower. "You have more protections if you're paying back your credit card or your mortgage," Frotman says. "There are big banks, federal servicers who are viewing the student debt crisis as their opportunity to get rich."
Democrats unveiled eight draft bills on Tuesday for discussion that would, among other things, establish a student borrowers' bill of rights, strengthen credit reporting standards, block debt collectors from unfairly going after student borrowers, protect private student loan borrowers and help borrowers with student debt purchase their first home.
"Student loan borrowers deserve and need the same protections that all consumers are entitled to in this country," Ashley Harrington, senior policy counsel for the Center for Responsible Lending, said during Tuesday's hearing.
"The solution to the student debt crisis is both working on front-end and back-end affordability," Harrington says. And that affordability on the back end includes strong servicing protections and quality servicing for all borrowers, she added.
Of course, it's not just loan servicers who are contributing to the student debt crisis. Rapidly rising tuition rates and stagnant wages also play a role.
"People aren't making more money, and college is objectively more expensive," Minhaj says. In fact, he looked at the 60 members of the House Financial Services Committee and on average, they graduated 33 years ago and spent $11,690 a year in inflation-adjusted tuition. Today, those same schools cost almost $25,000 a year, according to Minhaj's calculations. That's a 110% increase over a period of time when wages have only gone up 16%, he says.
"We've put up a paywall to the middle class, and if there's one thing that Americans don't deserve it's more paywalls," he says.
Those issues, however, likely fall under the purview of the Education and Labor Committee and the Education Department, Waters said Tuesday. But she noted that she believes the House Financial Services Committee can take a stand on student loan servicing.
"The rapidly increasing growth of student debt is indeed a national crisis and it is not something we should be playing politics with at all," Rep. Gregory Meeks (D-N.Y.) said during Tuesday's hearing.
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