Posted: Christian|June 26th, 2019

Student Debt

Connecticut Student Debt Reform Plan


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Written by Christian
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As student debt continues to rise, Americans watch as the 2016 Presidential candidates address their ideas on reform; however, Connecticut launched a plan to tackle their student debt crisis, moving forward beyond federal regulation.

Student borrowers have addressed their complaints to lack of streamlined capability of getting in touch with their loan servicers to make payments or address concerns. Documented complaints have been made, and after several attempts to contact a loan servicer on behalf of his wife, financial lawyer Bruce Adams, received various answers from multiple representatives when asking the same question.

"I expressed my frustration and said 'I am a financial lawyer and I understand the words you're using. I don't understand what you're telling me," Adams said to a group of lawmakers last year during a legislative hearing. "If it doesn't make sense to me, how it going to make sense to anyone who is not in this field?"

According to state representative (D) Matt Lesser, Adams story was quite convincing.

"To hear the General Counsel for the state department of banking say 'this is so infuriating, this is so complicated, I can't figure it out,' I think we all recognize that the average citizen in the state doesn't stand a chance," Lesser said.

Governor Dannel P. Malloy signed a bill last September aiming to tackle the rising student debt epidemic. Two new pieces of legislation were signed: The first allows students to refinance loans at lower rates while implementing lower monthly payments under Public Act 15-200. The second allows the state of Connecticut Department of Banking broader regulatory oversight to student loans ensuring the utmost fairness, under Public Act 12-162. The second act requires student loan servicers to attain licensing as they are "intimately involved in the administrative actions surrounding student loans, including the repayment process."

Listed among borrowers' complaints were servicers failing to post payments on time or simply applying payments to interest rather than principal. By employing this method, student borrowers had additional accruing interest with little or no reduction principal amount.

Advocates have pushed for student loan servicing reform, claiming the current method disables students to pay back loans accordingly.

According to a Consumer Financial Protection Bureau (CFPB) report, students were not informed of the various repayment options and were not provided with enough information to fully understand their options for protection. The report also demonstrated with the broad spectrum of options provided, default should not be an option, although one in four borrowers struggle to repay their loans. Advocates and borrowers claim loan servicers are partially to blame, as they're not offering assistance to borrowers to find an individualized repayment plan.

Subria Gordon, a legislative analyst in the state's department of African-American affairs said, "There's no one in this equation that's looking out for the consumer."

Ultimately, Gordon, Lesser, and Adams worked together to break down which areas were in need of reform.

"One of the critical changes we had to make is to think about the student debt crisis as something that's a systemic problem for the financial sector of the economy," Lesser said, according to a MarketWatch article.

Joshua Cohen, a lawyer specializing in student debt is concerned these new legislative acts may not be enough because federal student loan servicers may argue they will not have to abide by Connecticut law under pre-emptive federal law.

The trio of advocates remains hopeful to the new bill of rights protecting Connecticut borrowers, also understanding this law may not address the issue, collectively.

"We've started to take some steps in the right direction but there's still a lot more work to be done," said Gordon.

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