AG Ferguson’s student loan report reinforces need for protections
released on December 29, 2017
found in newsletter: December 2017
OLYMPIA — The number of student loan borrowers in Washington state likely exceeds 800,000, an increase of more than 35 percent compared to a decade ago, according to a report released today by the Washington State Attorney General’s Office.
Washingtonians collectively owed $24.4 billion in student loan debt at the end of 2016.
As part of Attorney General Ferguson’s ongoing efforts to protect student loan borrowers, his office created this student loan report to help policymakers and the public better understand the challenges faced by Washington borrowers. The Attorney General’s Office has received hundreds of complaints from student loan borrowers. Ferguson’s report highlights several of these complaints.
One borrower wrote to the Attorney General’s Office, “Over the years, I have attempted to repay student loan debt only to find myself with more fines, more interest, and rising monthly payments beyond my ability to meet.”
“There are too many student loan borrowers in Washington who are struggling to make payments,” said Ferguson. “Pursuing an education should not force students to take on insurmountable debt. We must do more to protect Washingtonians who feel like higher education equals a debt sentence.”
The Attorney General’s report illustrates current trends, difficulties and vulnerabilities for Washington student loan borrowers and residents. Among other important findings, the report identifies racial, gender and age disparities among student loan borrowers, the loans’ impacts on borrowers and the reasons these borrowers face so many obstacles to repayment.
Student loan debt has the highest delinquency rate of any form of consumer debt and has strict limitations in discharging it through bankruptcy.
Findings in the report reinforce the need to create more protections for borrowers. The report identifies legislation that would strengthen protections for student loan borrowers.
Quick facts: Disparities found in student loan borrowing
The AGO’s report finds there are significant disparities across gender, income, age and race.
Washington borrowers age 60 and over are on the rise, increasing by more than 35 percent in the last five years. Their student loan debt of $2.1 billion has nearly doubled, as has the delinquency rate, over the same time period.
Women hold nearly two-thirds of outstanding national student loan debt, and are most likely to experience difficulties in repaying their debt.
Students from low-income backgrounds are more likely to need student loans to attend higher education, and are more likely to have trouble repaying loans. Borrowers making less than $40,000 from 2006 to 2011 had a 35 percent default rate, while the rate of those making $60,000 to $80,000 was almost half that.
Black graduates tend to have over $7,000 more debt upon graduation than their white classmates. Four years after graduation, that gap widens to nearly $25,000 more debt.
Hispanic borrowers have about the same level of debt as white graduates, but are more than twice as likely to default.
Ferguson’s report includes the following recommendations to protect borrowers and address the debt crisis:
Enact state licensing and regulation to ensure student loan servicers play by the rules;
Create a student loan advocate in state government to assist borrowers;
Limit the amount of income that can be garnished to repay student debt;
Ensure students attending for-profit schools are adequately protected by providing accurate information like total program costs and postgraduation employment rates; and
Address college affordability to reduce student loan borrowing in the longer-term.
Working with a bipartisan group of legislators, Ferguson is proposing a Washington Student Loan Bill of Rights as Attorney General Request legislation to accomplish the first two recommendations. Ferguson’s lawsuit against loan servicer Navient and similar cases around the country demonstrate that student loan borrowers do not have adequate protections from student loan servicers.
The Washington student Loan Bill of Rights (SB 6029 / HB 1440) creates a dedicated student loan advocate and adopts standards for student loan servicers. The bill provides students with basic guarantees, including the assurance their payments are credited within one business day, requests for information will be responded to promptly in writing and fees assessed due to servicer error will be refunded. California, Connecticut and Illinois recently passed similar legislation. Sen. Marko Liias, D-Lynnwood, is the prime sponsor of the Senate bill, and Rep. Monica Stonier, D-Vancouver, is the prime sponsor of the House version.
A bill introduced by Rep. Tina Orwall, D-Des Moines, called the Student Opportunity, Assistance, and Relief Act (HB 1169), increases the amount of wages protected from garnishment to 85 percent, and the amount of funds in a bank account protected to $2,500, when the garnishment is for private student loan debt. These changes will allow borrowers who default to make payments on their other obligations and ensure they can pay for basic necessities.
Ferguson’s report illustrates that students who attend for-profit schools are more likely than other students to struggle repaying their student loan debt. Rep. Gerry Pollet, D-Seattle, has introduced legislation (HB 1439) that will ensure prospective students at private vocational schools receive accurate information about the postgraduate employment rate for those institutions, the total cost to complete those programs and graduates’ default rates for each school.
Student loan protections and the Attorney General’s Office
Attorney General Ferguson has successfully introduced student loan legislation in the past. Ferguson introduced the Student Loan Transparency Act in 2017, a bill that requires schools to provide students basic information on their student loans. The bill passed overwhelmingly in the House with a bipartisan vote and unanimously in the Senate.
Ferguson is committed to standing up for students by going after predatory for-profit colleges and making sure loan servicing companies play by the rules. He also has cracked down on debt adjustment companies that charge fees to help borrowers consolidate their federal student loans and enroll in income-driven repayment plans — tasks that borrowers’ loan servicers can and should help them with for free. More information on the office’s student loan work is available here.
To assist student loan borrowers in Washington, the Attorney General’s Office has compiled a Student Loan Survival Guide. This guide provides tips and links to resources to help high school students thinking about attending college, former college students who are not able to keep up with their payments, parents of students and everyone in between.
Original Press Release