Legislation Needed to Address Predatory Practices in the Student Loan Market Disproportionately Affecting Borrowers of Color
August 14, 2020 | SACRAMENTO, CA — Today, 23 state and national civil rights and advocacy organizations sent letters to California Senate leadership, urging them to pass the Student Borrower Bill of Rights (AB 376). At a time when Californians are experiencing the combined effects of a public health and economic crisis, the nearly four million student loan borrowers in the state urgently need the new protections and rights AB 376 would provide. The letter highlights how this is especially the case for Black and Latinx borrowers, who even before the pandemic began, faced the worst effects of the student debt crisis.
Decades of research has shown the student debt crisis is disproportionately borne by student loan borrowers from communities of color. In addition to taking on more debt, Black and Latinx borrowers face significant hurdles in repayment, both nationally and in California. Findings from the Federal Reserve Bank of San Francisco show the significant challenges facing borrowers of color in the state. For example, borrowers living in Bay Area neighborhoods with higher percentages of Black and Latinx residents face higher rates of delinquency and default. In Los Angeles, default rates in predominantly minority zip codes are double those in predominantly white zip codes.
The Borrower Bill of Rights would provide protections and rights that would help to address the severe disparity in student borrower outcomes that affect Black and Latinx borrowers in the state. After being introduced in February 2019, the Student Borrower Bill of Rights quickly advanced through the California Assembly and through two of three key Senate committees. It is set to be heard by the Senate Appropriations Committee on Thursday, August 20. This hearing is the last crucial step for AB-376 before final approval by the legislature and signature by the governor. If this committee advances AB-376, it could become law by the end of next month.
“There is an ever increasing amount of Latino college graduates that persevere significant hardship and financial burden to acquire a college education, yet are ill afforded basic protections when times are tough,” said Amalia Chamorro, Associate Director of Education Policy at UNIDOSUS. “The Student Borrowers Bill of Rights is an important step to ensure Latinos with college debt receive the support, flexibility, and protection from student loan industry gimmicks.”
“When immigrant youth enter college many of them navigate two journeys alone, the halls of higher education and entering into their first financial agreement. Many times these youth enter into loan agreements without knowing the exact details because of aggressive sale and promotion tactics that target immigrant students.” stated Joseph Villela, Director of Policy and Advocacy for the Coalition for Humane Immigrant Rights (CHIRLA). “California has an opportunity to protect student borrowers and provide a path away from debt to immigrant families who have utilized these products.”
“California should set the bar high in protecting the interests of student borrowers. Education is a human right,” said Raymundo Jaquez, Youth Law Academy Program Director, at Centro Legal de la Raza.
About The Student Borrower Bill of Rights, AB 376
AB 376, the California Student Borrower Bill of Rights, will create new consumer rights for all California student loan borrowers and establish special protections for military personnel and their families, nurses, teachers, and the disabled community. The legislation would require student loan companies to train their staff to understand these rights and create strong new consumer protections to prevent student loan companies from deceiving and misleading student loan borrowers. This bill also creates new penalties for companies that trick borrowers out of their repayment and public loan forgiveness rights and, for the first time, gives individual borrowers new legal remedies to address predatory and abusive practices.