Testimony:  Student Loan Consumer Assistance Program

Testimony by
David R. Jones Esq., President and CEO
Community Service Society

Higher Education Budget Hearing of the New York State Assembly Ways & Means Committee and the New York State Senate Finance Committee

Monday, January 28, 2019


Good morning.

Chairwoman Krueger, Chairwoman Weinstein, and members of the Assembly and Senate, thank you for the opportunity to testify.

My name is David Jones, and I am President and CEO of the Community Service Society (CSS).  CSS is a nonprofit organization that works to advance upward mobility for low-income New Yorkers. I’d like to discuss our experience encountering New Yorkers impacted by the actions of predatory student loan servicers, and the need for the state to fund a program CSS has developed to protect student loan borrowers.

Through our Financial Coaching Corps (FCC) program, we noticed that many clients have been looking for help managing their student loan debt, which is not surprising when you consider that the average student loan burden in New York is more than $30,000, a burden that disproportionately impacts communities of color or low-income families.

In late 2018, the New York Daily News reported that the nation’s third largest student loan lender, Navient, directed thousands of borrowers to high-cost repayment plans without first discussing more affordable options.  Navient reportedly made billions in profits off the interest on those student loans. Incredibly, this information was contained in an audit by the U.S. Department of Education. An audit, by the way, the Department did not intend to make public.

And just this month, the New York Attorney General reached a $9 million settlement with Conduent Education Services, who at one time was one of the largest student loan servicer in the country, for misleading borrowers.  Their violations were so severe that they are now banned from the loan servicer business for five years.

How is such abuse possible?  Tragically, it’s because the Trump Administration protects for-profit schools and predatory lenders at the expense of borrowers.  Their willingness to enable these companies led the former student loan Ombudsman at the Consumer Financial Protection Bureau, Seth Frotman, to resign in protest.  Mr. Frotman has since established a nationwide non-profit to assist states in reining in these companies.

So how does New York State protect vulnerable New Yorkers?

By funding an independent advocate who will take on their case, and advocate on their behalf, from start to finish.

That’s why CSS proposes the creation the Student Loan Consumer Assistance Program (SLCAP), a comprehensive statewide program designed to assist consumers with their student loan debt.  The program would provide unbiased information, direct personalized assistance, and where needed, legal assistance to individuals struggling with student debt. The goal of the program is to help student loan borrowers effectively manage their student debt, improve their financial health, and avoid bankruptcy or other outcomes that could hinder them for years. 

SLCAP is modeled on the highly successful Community Health Advocates (CHA) program which CSS has run, with the support of New York State, since 1999. The CHA Program provides consumer health insurance assistance services to hundreds of thousands of consumers through a toll-free “Helpline” and a statewide consortium of CBO’s.

In a similar fashion, SLCAP will utilize CHA’s innovative “hub and spokes” service approach in which a student loan debt “Helpline,” staffed by professionals and highly-trained volunteers, and a network of local community-based organizations throughout New York State, will provide borrowers with more complicated cases in-person counseling and assistance.

To initiate this program, CSS request that the legislature appropriate $1 million to get SLCAP off the ground.

A recent analysis by the Student Borrower Protection Center found that more than one in five New York consumers owe student loan debt. With so many New Yorkers being misled—even swindled—by loan servicers, and the severe impact it can have on their ability to pay rent, feed their families, and afford medical expenses, this very small investment would pay huge dividends in communities statewide.   

Thank you for the opportunity to testify, and I would be happy to respond to any questions you may have.


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