LANSING — Today, Democratic legislators in the Michigan House and Senate introduced a package of three bills that would protect student borrowers and people currently repaying student loans from predatory lenders.
“People lost their homes in 2008 because of unregulated and deceptive practices,” Senator David Knezek (D–Dearborn Heights) said. “Our goal is to ensure students will not be targeted in the same way.”
The three-bill package would create a Student Loan Bill of Rights and Student Loan Ombudsman to help educate and empower borrowers, address student complaints, and help students better understand their rights and obligations.
It also would reinstate the Michigan Higher Education Authority (MHEAA) and address student loan servicers directly by adding a licensing requirement with strict operating guidelines. Currently, servicers can pressure students with fines or denial of service if they fail to open specific types of bank accounts, maintain an account balance or purchase bank products — all of which are unnecessary to pay back a loan.
“Turning a profit on the backs of students who are trying to finance their educations is despicable,” Sen. Coleman A. Young II (D–Detroit) said. “These bills will make managing student loans easier and more honest.”
The legislation would:
- Create a Student Loan Ombudsman and Student Loan Bill of Rights, sponsored by Sen. Rebekah Warren (D–Ann Arbor) and Rep. Henry Yanez (D–Sterling Heights).
- Add a student loan servicer licensing requirement, sponsored by Sen. Young and Rep. Winnie Brinks (D–Grand Rapids).
- Reinstate the MHEAA, sponsored by Sen. David Knezek (D–Dearborn Heights) andRep. Charles Brunner (D–Bay City), which was dissolved in 2006.
“Signing contracts for college loans is a huge commitment for students, and they deserve to know exactly what they are getting into and what their responsibilities will be when those loans come due,” said state Rep. Henry Yanez (D-Sterling Heights). “Our bills put students before profits and ensure that loan servicers don’t use predatory lending practices on our new college grads as they start their careers.”
Similar legislation was passed in Connecticut last year. Other states are considering related measures to address the $1.3 trillion in student loan debt standing between students and their futures.