The California Student Borrower Bill of Rights, or AB 376, was passed by the California state legislature and signed by Gov. Gavin Newsom on Sept. 28. The legislation intends to strengthen protections for student borrowers from predatory student loan practices.
AB 376 does not forgive debt but offers consumer protections to more than 3.8 million Californians, who collectively owe more than $147 billion in student loan debt.
AB 376 will bar lenders from charging more than 6% of past-due balance as late fees. It will require lenders to train their staff with a comprehensive knowledge of student borrower rights and penalize lenders for providing borrowers with misleading and deceptive information about their options or rights.
The bill will also make federal student loan standards a part of California law so that state authorities will have the power to enforce said law and prosecute those who break it. AB 376 will also establish a Student Loan Ombudsman responsible for investigating borrower complaints.
“Californians needed robust consumer protections from student loan industry abuses when this bill was introduced over a year ago,” said Natalia Abrams, Executive Director of Student Debt Crisis, in a press release. “Today, in the middle of the worst health and economic crisis in generations, the Student Borrower Bill of Rights is needed more than ever.”
While Connecticut, Maine and New York have their own versions of a student borrower bill of rights, California’s will have the strongest and most comprehensive student borrower protection legislation ever enacted.
Tanisha Bradfield, Orange Coast College’s Director of Financial Aid, believes that AB 376 is a good first step, but more needs to be done.
“There needs to be more education given, and in my opinion required, before taking out a loan,” said Bradfield. “You have entrance counseling, you have exit counseling, But there needs to be a literacy program for students understanding, when you take this loan out, this is what it means.”
Currently the only loan education required before receiving a federal student loan is a 20 minute online entrance counseling session. Some schools have found the entrance counseling to be insufficient and have added their own additional student loan counseling requirements.
Bradfield also believes that there is too high an expectation on student borrowers ability to pay back their loans, especially during the current economic crisis.
“I think there needs to be more talk about loan forgiveness, and not just for public servants,” Bradfield said.