California is running out of time to protect student loan borrowers

CAL Matters

Samantha Seng and Cody Hounanian, Special to CalMatters

August 17, 2020

IN SUMMARY

Legislation in the state Senate would make California the first state in the nation to establish basic consumer protections for student loan borrowers.

August typically marks the start of students heading to campus for fall classes at our state’s colleges and universities. As we all know, though – this is no typical year.

Fall classes are increasingly remote-only and many campus reopenings remain uncertain. In the midst of all this uncertainty, however, one thing remains constant: once again, too many California students will be victimized by predatory lending practices and overburdened by student loan debt.

Almost 4 million Californians currently owe more than $147 billion in student loans. Many of these loans were made without the students having sufficient information about the debt load they were undertaking. Other loans are exacerbated by egregious practices such as pushing students from certain neighborhoods into more expensive repayment plans or loans with higher interest rates.

Now, given the current economic instability, many Californians are unable to make student loans, mortgages and rent payments. And the decrease in unemployment benefits and other pandemic related financial impacts are having a cumulative effect on student loan borrowers. More than 508,000 Californians are in default on their student loans, $14 billion worth.  And every day more California students find their way into this trap.

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