North Carolina lawmakers push bill with more oversight on student loans
Imagine that you are 17 years old, your mother has passed away, and you are financially independent.
Imagine what it would mean at that point in time for a college to give you a scholarship to play basketball.
Now imagine it all washed away after an injury.
This is the story of Kanethia Rankin, 37, who raised about $ 70,000 in student loans after her injury cost her her scholarship.
She tried to get out of debt, but said she was placed on a payment plan that she can’t afford.
“I tried to establish a payment plan that I can pay monthly to get myself out of this debt and it was not possible,” Rankin said.
North Carolina debts
Rankin is one of 1.3 million people in North Carolina who have collectively borrowed $ 48 billion in student loans and are now making payments to try to pay off that debt.
Representatives Rachel Hunt, D-Charlotte, Jon Hardister, R-Whitsett and Mitchell Setzer, R-Catawba, rally behind these borrowers with Internal bill 707, known as the Student Loan Borrowers Bill of Rights. It reflects bills passed in 13 other states and in Washington, DC
Hunt, a college counselor, said that when students took out these loans at 17 and 18, they received documents with a bunch of promises about repayment options and loan forgiveness that are not being honored from the other side of the college.
She said this bill is not meant to help people avoid paying their debts, but to lobby for fair treatment of borrowers.
“This bill will do nothing to reduce the amount of debt borrowers owe,” said Rochelle Sparko, North Carolina policy director at the Center for Responsible Lending in Durham, “but it will ensure that ‘they’ are in the best possible negotiating position to repay this debt in an affordable manner. “
Monthly payments on student loans can reach, if not more, than rent or a mortgage payment with little leeway to reduce these numbers.
“We need people to have the capacity to have successful lives economically,” Hunt said. “It would help the state immensely if they were treated in a way that understood their responsibilities towards these debts and how to repay them, in an honest manner; but they don’t have that.
If HB 707 becomes law, the State would have to agent of banks to authorize and regulate student loan providers, create a means for borrowers to complain about unfair lending practices, and allow the borrower and the attorney general’s office to prosecute lenders who do not follow the guidelines of the bank. the State in matters of lending.
House members wanted to hold a hearing on the bill on Thursday, but had to postpone it for a week to finalize a new version that Hardister said would insist the bill does not apply to banks.
“We got the Bankers Association involved and they’re not against the bill, but they want to make sure we have the right language,” Hardister said.
He added that banks are already heavily regulated but non-bank institutions have no control.
“It’s something I don’t think the General Assembly should ignore,” said Hardister. “I think we need to put some kind of monitoring framework in place.”
Lawmakers said last month, when they introduced the bill, that it was similar to what they did to offer residents relief from mortgage companies during the 2008 housing crisis. said they hoped HB 707 would free up borrowers’ resources and help stimulate the economy.
Hardister said there are too many stories of people taking out student loans, not getting a job right away, or not being able to pay the required amount right out of college.
He said loan companies have not been transparent about what happens when someone defers payment or forbears. He said these borrowers think they are being given a break, but they are not told the consequences.
This is what happened to Rankin.
She has stories of trying to get reduced, deferred, or postponed loan repayments and how much it cost her.
She also responded to letters saying her loans were eligible for forgiveness, but these lenders either turned her down or turned out to be suspicious as scams.
Rankin said that at some point she had to decide whether to keep a roof over her head or make her monthly payment. She ended up defaulting on her loan, affecting her credit rating and then her ability to get a decent car and house.
To make choices
Hunt said she has seen how student loans and tuition have hurt her students.
Like Rankin, she has seen students lose their scholarships after sports injury.
And she said some students have postponed working at the company they love or saving for retirement so they can pay off their loans.
“We know they can’t just fix this problem through bankruptcy or any other way,” Hunt said. “It keeps people from living successfully.”
Hunt said his teenage students had no lending experience, and those who are the first generation to go to college or speak English as a second language are at a greater disadvantage in understanding how loans work than some of their peers.
Sparko says that even when families understand the student The terms of service of the loans, the providers are breaking the promises they made when the students left for college.
“They don’t necessarily provide complete or accurate information, or work with borrowers to get them into the best possible repayment plans for them,” Sparko said.
Sparko added that some loan providers have treated borrowers so badly that they have added billions of dollars in interest charges to student loan debt across the country.
Instead of treating borrowers like customers, Sparko said, lenders see the US Department of Education as their customer.
Sparko said the ministry grants 85 to 90 percent of student loans nationwide and contracts with 30 to 40 companies. She said of those contract companies, about five have the majority of service obligations.
He It takes a lot of time and effort to put someone on an income-based repayment plan, Sparko said, so instead of giving this option, they defer payments.
Deferral of payments increases the amount of interest a borrower accumulates and also negates their ability to recover their debts if they do not earn enough money for the time set in the loan terms. She said that includes those who are offered this incentive to work in the public service.
“There are both anecdotal and data-driven analysis that these services do not give people debt relief when they are entitled to it, ”said Sparko.
This leaves borrowers with two options: complain to the Attorney General’s office or to the Consumer Financial Protection Bureau.
But Sparko said those complaints rarely amounted to anything.
Scott Buchanan, executive director of the Student Loan Servicing Alliance, tells a different story and says before lawmakers find a solution they need to get to the root of the problem.
HB 707 requires a lender to pay a fee to the state in order to operate in North Carolina. He said that those fees, along with the attorney fees to litigate any lawsuits that might be created under this bill, would end up being passed on to the borrower, costing them even more.
Buchanan said that by 2020, borrowers nationwide had filed 98 legitimate complaints. He acknowledged that federal loan repayments had been frozen for part of 2020 due to the pandemic. But Buchanan said that over the past four years, complaints have declined by 70%.
He said he worked with student loan borrowers and the majority of their complaints were that they had taken more loans than they could afford and did not understand the repayment process at 18. years.
He added that college tuition fees need to be re-examined and that lawmakers in North Carolina are controlling this at state colleges.
Buchanan is not completely opposed to HB 707. Buchanan said borrowers face real problems and part of the bill calling for a state official to look into these complaints would benefit the state.
He said lawmakers should dump the rest of the bill until they have real data and information and fix the issues after learning what they are.
Get out of debt
Rankin worked with Sparko to get help on his loans.
“I’m trying to get in order,” Rankin said. “I worked with a financial advisor and even with his help it was almost impossible to get out of this debt, and it seems like a nightmare that will never go away.
She said she believed that after losing her mother at 10 and trying to be financially independent at 17, going to college and getting a degree would benefit her and move her life forward.
“I really don’t think I would have tried to get a college degree, if I had known it would have that kind of effect with it, along with other positive things that I’m trying to do,” Rankin said. .
Rankin never graduated from college, but is now a manager at Starbucks, a company she said she loves and plans to retire from.
She believes going back and completing her business degree would be beneficial for her and her business.
And Starbucks offers to pay for a bachelor’s degree from Arizona State University. But she said after what she had been going through with her student loan debt, she was too scared to try again.
For more information on North Carolina government and politics, listen to The News & Observer and NC Insider’s Under the Dome politics podcast. You can find it on Pandora, Spotify, Apple podcasts, Stitcher, iHeartRadio, Amazon Music, Megaphone or wherever you get your podcasts.