Predatory student lending practices are a huge stumbling block on the path to long-term success for the thousands of Mainers graduating from college each year. But instead of bolstering protections for borrowers, the Maine Legislature has chosen instead to stand with the companies that are cheating them.
College students in Maine graduate owing an average of $29,644 in education debt — the 14th highest in the nation, according to the nonprofit Project on Student Debt. Though that total is lower than the national average, it’s a lot to pay off in a state where personal income also lags behind much of the rest of the country.
And student loan servicers only add to the hassle: mishandling payments so that borrowers appear to be delinquent or in default, steering borrowers toward high-interest repayment plans and misleading them about how to stay enrolled in affordable, income-driven plans. As a result, student loan complaints from Maine borrowers to federal regulators shot up by 571 percent in the first three months of this year, compared with the same period in 2016.
L.D. 1507, sponsored by state Sen. Eloise Vitelli, D-Arrowsic, would require licensing and oversight of student loan servicers and prohibit these deceptive practices. Supported by Maine’s student veterans and loan counselors, as well as AARP (many Maine seniors are signing on to student loans for relatives), L.D. 1507 got the unanimous backing of the Insurance and Financial Services Committee on May 11 — only to be sent back to committee last week by the Maine Senate.
Why did the Senate suddenly put the brakes on L.D. 1507? Less than two weeks after the committee vote, Navient Corp. — the nation’s largest consumer loan servicer — registered to lobby against the bill, just like they’re doing in New York and Washington, two other states that are considering reining in loan servicers. You don’t have to be a political scientist to make the connection.
Navient says it’s motivated not by profit, but by the desire to avoid a patchwork of state student loan regulations. That’s hard to swallow, given what’s at stake for the company. It reportedly made $4 billion in interest charges between January 2010 and March 2015 by steering struggling borrowers toward forbearance — in which payments are postponed, while interest continues to mount — instead of plans that allow for a lower monthly payment.
The senators who essentially voted to table L.D. 1507 should be ashamed of themselves. By folding when pressured by a predatory corporation, they provided the people who elected them an inadvertent — and ugly — lesson in how government really works.
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