URBAN AGENDA - Student Loan Debt: A $90 Billion Crisis We Cannot Ignore
David R. Jones, Esq., President and CEO of the Community Service Society of New York | 1/23/2020, midnight
The student loan debt crisis is real. Through no fault of their own, an alarming number of student borrowers find themselves the victims of unscrupulous lenders just because they went to college and trade schools in search of better job opportunities, a good standard of living and financial security. In New York, student loan debt is a $90 billion crisis. Over the past year, the controversy has taken countless strange twists and turns: billionaires are randomly paying off people’s student loans, while at the same time, student debt scams are running rampant, and public loan forgiveness programs are faltering.
On January 30 my organization, the Community Service Society, will host a panel discussion on the crisis, New York’s response and what more policymakers, advocates and other stakeholders can do to hold loan servicers accountable in order to help the state’s 2.4 million student borrowers – both those already in serious debt and those who are at the precipice. The event is free and open to the public.
New York and a half-dozen other states have taken very promising steps recently to tackle the crisis head-on. As part of the 2019 budget, New York enacted the Student Loan Servicing Act of 2019, which included measures to license servicers and established a borrowers’ bill of rights. The statute was enacted to serve a real need: since 2012, New Yorkers have filed more than 4,300 complaints about their student loan servicers. What’s more, Attorney General Letitia James’s office negotiated a $9 million settlement with New Jersey-based ACS Education Services, known as Conduent Education Services, for steering 55,000 struggling student loan borrowers into temporary pauses in monthly payments instead of directing them towards affordable income-based repayment programs. Her office recently filed another case against one of the nation’s largest student loan servicers for unscrupulous practices.
Victims of deceitful lenders and servicers range from young people at the beginning of their adult lives to a surprising number of borrowers over the age of 50, according to the Government Accountability Office (GAO). The GAO also noted that older borrowers who defaulted on their loans decades ago faced reductions in their Social Security to repay them. Three quarters had taken loans for their own education and owed less than $10,000 at the time of the initial “offset” from their Social Security benefits.
Women of Color Harmed the Most by Student Debt
Women make up the largest group mired in student debt. They collectively hold $929 billion in student loans, an amount which comprises nearly a third of all U.S. student loan debt according to the American Association of University Women (AAUW). In part because of the gender pay gap, women take longer — and struggle more — to pay off their loans. The debt burden then delays their purchase of homes, undercuts their retirement savings and discourages them from starting small businesses, AAUW says.
Women graduating with a bachelor’s degree face a median cumulative debt of $21,619; men face $18,880. But the problem is even worse for women of color: the AAUW analysis found that black women graduates faced a median debt load of $30,366.
Student Debt is a Growing National Crisis, Fueled by Federal Policy Changes
While New York is working hard to reverse the trend, federal policy changes mean the situation facing student borrowers only promises to get worse. For years, state attorneys general worked side-by-side with the U.S. Treasury Department and the Consumer Financial Protection Bureau to push the federal government to help struggling student loan borrowers, but that’s not happening anymore. And under Education Secretary Betsy DeVos, the Trump administration has freed the powerful student loan industry to trample borrowers’ rights by rolling back protections piece by piece and by simply ignoring the victims defrauded by student loan servicers. DeVos plans to step up her relentless campaign to roll back oversight of predatory student loan companies, with plans to enact new regulations that scale back loan forgiveness even further for students who claim they were defrauded by loan servicers. The regulations will also bar borrowers from asking state courts to act in order to forgive their loans. This new regime will cost student borrowers billions more in debt payments.
So, where does that leave us? Because the federal government has abdicated its responsibility to police the loan servicing industry and protect consumers, New York must step up with a unified response that combines regulatory measures and enforcement with direct services that help people already dealing with crushing debt find a pathway to improved financial health, and brighter tomorrow. That’s why I am urging state lawmakers to fully fund the Education Debt Consumer Assistance Program (EDCAP) which helps borrowers protect themselves from unscrupulous loan servicers, scam artists and predatory lenders. At our January 30 Forum we will explore the issues driving this crisis, and ways to help borrowers fight back. We hope you will join us.”
David R. Jones, Esq., is President and CEO of the Community Service Society of New York (CSS), the leading voice on behalf of low-income New Yorkers for more than 170 years. The views expressed in this column are solely those of the writer. The Urban Agenda is available on CSS’s website: www.cssny.org.