In the Illinois State Senate there is a bill floating around being called the Student Loan Bill of Rights. The idea of a student loan bill of rights is something that has been proposed by many different entities and politicians over the years. The Illinois version isn’t really a comprehensive bill of rights. Instead, it is a list of rules to keep student loan servicers in check and accountable.
The New Law
If the bill becomes law in Illinois, loan servicers would be required to give borrowers accurate information on billing statements and properly process borrowers’ payments. While accurate bills and payment processing seem like something that should be expected of any business, in the student loan world many servicers fall short of this basic standard.
Similarly, the bill requires servicers to follow procedures when a loan is transferred to a new servicer to ensure continuity and ensure borrowers’ payments are properly handled. Here again is another obvious expectation but one that rarely happens with student loans. All too often, loans are transferred and the last person to find out is the borrower. This can result in unjustified late fees and unnecessary interest charges. Requiring loans that change servicers to go through a uniform process would be a huge win for consumers.
Additionally, borrowers would have the right to request information and file account disputes with their servicer and appeal any servicer determination. This would be a huge change and something would level the playing field. Right now loan servicers hold almost all the cards. They alone track information, they decide what gets shared and how, and what they say is final absent the borrower taking them to court. This is a ton of authority to give servicers, especially given their poor track record for reliability. Requiring servicers to provide information and providing a place for borrowers to appeal their decisions would be a major positive change in student loan servicing.
Finally, the bill creates a student loan ombudsman in the office of the attorney general to assist borrowers with student loans and establishes a student loan servicing license with the Illinois Department of Financial and Professional Regulation. Loan servicers get massive contracts from the government and very little is done to make sure the taxpayers are getting good value for their money. Creating an ombudsman and providing oversight is a great way to make sure the loan servicers are delivering what they have promised. This move would protect borrowers who want fair treatment and taxpayers who expect their money to not be wasted.
Looking Beyond Illinois
It is kind of sad that such a proposal is not just helpful, but long overdue. The corporations running loan servicing have been getting paid a ton and in return they provided mostly headaches to borrowers.
If the bill were to become law in Illinois, it could serve as a blueprint for other states to follow suit. If enough states enact consumer protection laws of this nature it would force loan servicers to train their people better and to do their jobs better. This would be a win for all borrowers.
If you are unhappy with your loan servicer, be sure to check out our guide to switching federal loan servicers.