As Feds ignore student debt crisis, states like Md. step in

More than 44 million Americans owe more than $1.5 trillion dollars in student debt. A student loan borrower defaults every 28 seconds — more than 1 million each year, nationwide. Last year, three times as many Americans defaulted on a student loan as lost a home to foreclosure.

Millions of Americans are anxiously trying to deal with the consequences of student debt, including hundreds of thousands of people across Maryland.

The student loan borrowers here are teachers, nurses, service members and veterans — young and old, urban and rural, black and white. In Maryland alone, more than three-quarters of a million borrowers, including more than 115,000 people in Maryland’s rural communities, now owe more than $32 billion in student loan debt.

Struggling to manage unaffordable student debt means being subjected to the student loan industry’s servicers. These companies add insult to injury for Maryland student loan borrowers by routinely losing paperwork, providing bad information and denying borrowers access to key consumer protections that can save them thousands of dollars and could have kept them out of default to begin with.

These predatory practices are pervasive: In just over two years, more than a half-dozen federal and state agencies have sued student loan companies to halt alleged abuses at every stage of repayment.

It didn’t have to be this way.

For years, we worked side-by-side at the U.S. Treasury Department and the Consumer Financial Protection Bureau to push the federal government to help struggling student loan borrowers. Together, we sought to provide student loan borrowers the same protections afforded consumers who have a mortgage or credit card. We worked to expand oversight and to rein in the predatory student loan companies that view borrowers’ struggles as a chance to make a quick buck. And we fought to ensure that student loan servicers — the companies getting hundreds of millions of our taxpayer dollars — actually follow the law and do their jobs, helping millions of people get loan payments they can afford.

But Education Secretary Betsy DeVos and the Trump administration have rolled back this progress piece by piece, siding with powerful student loan companies and walking away from the pressing need to protect borrowers. As a result, for more than two years, the student loan industry has been free to trample borrowers’ rights.

So where does that leave us? We’re looking to states like Maryland to tackle the student debt crisis head on. As our leaders in Washington turn their backs on borrowers, Annapolis has an opportunity — and an obligation — to stand up for these borrowers’ rights.

We’ve been down this road before.

A decade ago, in the throes of the foreclosure crisis, state lawmakers and law enforcement officials took on the mortgage industry and stood up for homeowners’ rights in the face of federal inaction and obstruction. The student debt crisis mirrors the worst aspects of the last crisis, and Maryland lawmakers can follow the same playbook — using state law to protect borrowers and halt abuses.

Whether it’s curtailing abusive payday lending or shutting down “debt relief” scams, state governments — the “laboratories of democracy” — have grown impatient waiting for Washington to act while our fellow citizens struggle. By advancing creative and cutting edge consumer protection initiatives, states like Maryland have stepped into the breach.

Student loan borrowers and their families deserve nothing less. That’s why we strongly support Attorney General Brian Frosh and leaders in the Maryland General Assembly in their fight to give the state of Maryland and individual borrowers new tools to avoid student loan industry abuses and seek justice when borrowers are wronged. If the federal government is going to fall down in its response and ignore reality, then the state of Maryland must rise up to protect borrowers — a generation depends on it.

Sarah Bloom Raskin is the former deputy secretary of the Treasury, a former governor of the Federal Reserve and a former Maryland commissioner for financial regulation. Seth Frotman (seth.frotman@protectborrowers.org) is executive director of the nonprofit Student Borrowers Protection Center and former student loan ombudsman for the Consumer Financial Protection Bureau.

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