Attorney General Ellen Rosenblum holds a press conference at the Capitol on Monday for her proposal to protect student loan borrowers from predatory lenders. (Aubrey Wieber/Salem Reporter)
A movement to stop predatory lenders from bilking Oregon students for tens of thousands of dollars has taken hold.
Attorney General Ellen Rosenblum’s bill aimed at regulating the student loan industry got a hearing Monday. Loan borrowers and regulators told the House Committee on Business and Labor how out-of-state companies are misleading and exploiting Oregon students in order to suck money from them for years, or decades, after they graduate.
Seth Frotman, formerly the top federal official overseeing the student loan market, said he heard from tens of thousands of borrowers in every state. He said the current system allowing predatory lending constitutes a “crisis.”
“Their complaints highlight the rampant illegal practices and inexcusable policy failures and have placed the American dream out of reach for far too many,” Frotman said.
He said if legislators fail to act, “the student loan industry has free rein to run roughshod over a generation of student loan borrowers.”
Frotman is now the executive director of the Student Borrower Protection Center. He traveled to Salem to give in-person testimony Monday, urging committee members to support House Bill 2588.
The bill would require loan servicers collecting on private and federal loans to be licensed by the state.
It would create an Oregon Student Loan Ombudsman, which would provide more oversight over lenders operating in Oregon and give borrowers more information on private loan terms and interest rates. An amendment would fund counseling for students who are unclear about repayment options.
The bill is modeled after successful legislation in Connecticut, Rosenblum said, and has been successfully implemented in a handful of states. About 10 others are looking to push similar legislation in the next couple years.
There are different kinds of loans and all have their problems, Frotman said.
Seth Frotman, formerly the top federal official overseeing the student loan market, traveled to Oregon to support the bill. (Aubrey Wieber/Salem Reporter)
Private loans can come with extremely high interest rates. Federal loans are more regulated, but borrowers pay those loans off through private loan service companies that can use dishonest practices to get more interest money from borrowers, he said.
The bill looks to add regulation or services to protect borrowers of all types of loans.
Nationally, Frotman said, 44 million borrowers owe $1.5 trillion in student debt. In Oregon, about half a million borrowers owe $20 billion, and 84,000 of them are behind by at least two payments. It’s the second-highest type of debt after mortgage debt, Rosenblum said.
Part of the problem is predatory lenders are misleading or dishonest in their information to borrowers about repayment options and interest, Frotman said.
That, he testified, led to a borrower in Brookings owing an additional $23,000 because her lender wouldn’t let her make payments while her cosigner was in bankruptcy proceedings. Others paid thousands of dollars in needless interest because their lender wasn’t forthright about repayment options.
Ailyn Angel of Western Oregon University is currently $13,000 in debt. She tries to stay away from private lenders, but said she gets unsolicited calls offering her new loans. She said on average, women get saddled with $3,000 more in student debt than men, and then go on to make less in the workplace for the same work.
African-American borrowers owe on average $7,400 more than their white counterparts upon graduation, Rosenblum said.
Perla Alvarez, Oregon Student Association’s legislative director, said this bill would especially help first-generation and migrant students, as well as those of immigrants. She owes $15,000 and said she didn’t have someone guide her through the process of borrowing such a large amount of money.
The bill has bipartisan support, evidenced by Republican and Democratic representatives and senators who appeared at Rosenblum’s press conference for the bill Monday afternoon.
Rep. Karin Power, D-Milwaukie, and Rep. David Brock Smith, R-Port Orford, are part of the Future Caucus, a bipartisan group of younger lawmakers.
Representatives Karin Power and David Brock Smith spoke about the bipartisan support for Rosenblum’s bill. (Aubrey Wieber/Salem Reporter)
That group has made student debt part of its focus. Power and Brock Smith said they anticipate wide support.
“This is something that reaches beyond party lines,” Brock Smith said.
Rosenblum said she hasn’t heard of opposition from constituents or the lobby.
“All systems are go,” she said.
The bill has been referred to Ways and Means, which will nail down how much the program will cost.
Rosenblum said rough estimates put the cost of the new office at $1 million, but she doesn’t know how solid that number is.
Frotman said borrowers should look at student debt as a legal issue, and if they feel they have been taken advantage of, they should reach out to Rosenblum’s office to see what can be done. If the bill passes and the ombudsman is created, it will just increase access to those resources, Rosenblum said.
“Once you owe that money, once that first payment becomes due, you need to have the best servicer that you can to be able to help you to get the loan paid off so that it won’t be an obligation of a lifetime,” Rosenblum said.
Reporter Aubrey Wieber: [email protected] or 503-575-1251. Wieber is a reporter for Salem Reporter who works for the Oregon Capital Bureau, a collaboration of EO Media Group, the Pamplin Media Group, and Salem Reporter.
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