Bill to Address Student Debt Crisis, Protect Students Clears Committee!

Senate Education Committee approves bill to provide Colorado students with protections against predatory student loan lenders

Denver, CO – Today, Senator Faith Winter and Senator Julie Gonzales testified before the Senate Education Committee in support of their bill, SB21-057, the Student Loan Equity Act. The bill aims to address the growing student debt crisis and would provide Colorado student loan borrowers with some of the most comprehensive protections in the country. 

“Private student loan lenders have been using predatory practices to take advantage of borrowers for years. And as people struggle to find work during the economic downturn, this issue has only been exacerbated,” said Senator Faith Winter, D-Westminster. “If we are going to successfully recover our economy following this devastating pandemic, we need to provide protections for the hundreds of thousands of Coloradans who are crippled by student debt and allow them the space to forge a path towards financial freedom. ”

“The growing student debt crisis is hurting people of color the most,” said Senator Julie Gonzales, D-Denver. “Paying back student loans should be fair and transparent, yet student borrowers and their families are continually exploited by predatory lending practices, exacerbating racial disparities and inequity. This bill will protect vulnerable and marginalized borrowers in Colorado – giving people a chance to fight for their economic future.” 

Statewide, Colorado borrowers currently owe $9.1 billion in private student loan debt and that number is only growing as the industry expands. High rates of debt accumulation, especially as the cost of college has risen, widens an already large intergenerational debt and wealth gap for historically disadvantaged communities.

In an effort to address the student debt crisis, this legislation would secure necessary consumer protections for private student loan borrowers, including: providing protections for cosigners, requiring companies to tell borrowers about all the available repayment options, expanding disability discharge requirements, giving borrowers legal recourse when facing abuse, putting an end to predatory practices, and holding bad actors accountable.

Over 90% of undergraduate private student loans are cosigned, usually by a parent or grandparent. This bill would support co-signers by requiring more robust disclosures, allowing cosigner release if certain conditions are met – including 12 months of consecutive on-time payments – and ensuring that cosigners have access to all documentation and records.

In addition, the bill would end “robo-signing”, a practice used in collection lawsuits, and place the burden on creditors to verify the validity of debts to ensure that creditors are not obtaining judgments against borrowers for time-barred or unsubstantiated debt.

The legislation would also close the loopholes that allow predatory lenders to operate without supervision and transparency, promote unfair loans, and prey upon vulnerable borrowers.

Private student loan borrowers have limited and inconsistent options or recourse when managing repayment and navigating exploitive servicers. This legislation provides legal recourse for borrowers who are harmed by predatory acts and practices. Under this law, when borrowers’ rights are violated, they will be empowered to bring an action against the lender or servicer for restitution and damages. Borrowers will additionally be able to pursue class actions.

SB21-057 now moves to the Senate Finance Committee for consideration. To track the progress of the bill, visit the Colorado General Assembly’s website.