In his 2018 State of the State address, Gov. Cuomo said student loan debt is the second highest debt category in the United States after mortgage debt, accounting for 10 percent of debt balance and amounting to $1.48 trillion nationwide.
In New York State, according to a 2019 Student Loan Protection Center analysis of U.S. Department of Education data, the average student loan burden is more than $38,000 and the total student loan debt is over $90 billion.
Research shows that student debt disproportionately impacts communities of color or low-income families. Predatory student lending, fraudulent business practices in the loan servicing industry, a lack of information on repaying student loan debt responsibly, and a gross absence of federal oversight are all contributing to this crisis. Not surprisingly, most student loan problems arise from lack of knowledge rather than a lack of resources.
Trump Policies Imperil Student Borrowers
President Trump has taken steps to place students with college loans in peril. In response, the top federal official in charge of handling complaints about student loans, Seth Frotman, stepped down in protest in August 2018, citing the Trump administration’s protection of predatory lenders at the expense of borrowers. Mr. Frotman, who was the student loan ombudsman at the Consumer Financial Protection Bureau (CFPB), said in his resignation letter that millions of borrowers had been harmed by sweeping changes at the CFPB. He claimed that under Trump, the CFPB has been used to “serve the wishes of the most powerful financial companies in America.” Among other things, the Trump Administration halted the release of a report on legally questionable fees charged to students, and it is feared they are planning to drop a lawsuit brought by the Obama Administration against Navient, one of the largest student loan collectors in the country. The suit claims that Navient has for years misled borrowers and made serious mistakes at nearly every step of the collections process, illegally driving up loan repayment costs for millions of borrowers. Navient handles $300 billion in private and federal loans for 12 million people - touching about one in four student loan borrowers.
What Can New York State Do?
Addressing the student loan debt problem begins with ensuring borrowers have access to much-needed education on repayment options and direct assistance when working with the for-profit loan servicing industry. State lawmakers have proposed legislation to regulate student loan servicers and grant enforcement powers to the State Department of Financial Services, but it has not been enacted. The Governor’s office established a Student Loan Ombudsman in 2018 to give loan holders a point of contact for issues with servicers, but given the scope of the problem, it can’t begin to assist the thousands of students in need of assistance.