Courtney Davis, Community Development Specialist
Financial Coaching Corps, Community Service Society of New York
Before the New York State Assembly Standing Committee on Banks and Standing Committee on Consumer Affairs and Protection
November 27, 2018
Chairman Zebrowski and members of the Assembly Standing Committee on Banking, and Chairman Titone and members of the Assembly Standing Committee on Consumer Affairs and Protection, thank you for the opportunity to testify today.
My name is Courtney Davis. I am a Community Development Specialist with the Community Service Society’s Financial Coaching Corps program.
The Community Service Society (CSS) is a nonprofit organization that works to advance upward mobility for low-income New Yorkers. The Financial Coaching Corps (FCC) program provides a rigorous training program for retired professionals and older adult volunteers (aged 55 and up) who are placed in community-based agencies where they offer one-on-one assistance to low-income clients struggling with various financial problems.
Many of the clients our volunteers counsel are looking for help managing their student loan debt. To that end, our FCC volunteers undergo training in the key areas of the student loan debt -- from loan servicers, types of student loans and concepts such as income-based repayment, default and forbearance, to problem-solving techniques, accessing information on the National Student Loan Data System, or NSLDS, and utilizing other applicable resources.
In New York State, the average student loan burden is more than $30,000, according to a 2016 report by the New York State Comptroller. Research shows that student debt disproportionately impacts communities of color or low-income families.
CSS supports legislation that would license and regulate the loan servicing sector and subject them to enforcement by the State Department of Financial Services if they violate consumer protection statutes. Specifically, we support Assembly bills 7582, 8450 and 10629.
Given troubling reports on fraudulent practices by loan servicing companies, along with the gross absence of oversight of the sector at the federal level, there is indeed a profound need to enact measures here in New York that will hold loan servicers accountable when they mislead borrowers and cause mistakes that drive up the costs of student loans.
Last week, the New York Daily News reported that the nation’s third largest student loan lender directed thousands of borrowers to high-cost repayment plans without first discussing more affordable options. The lender, 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.
This is just one more alarming example of how the Trump Administration protects for-profit schools and predatory lenders at the expense of borrowers. In fact, for years Navient has been accused of misleading borrowers and making serious mistakes at nearly every step of the collections process. It handles $300 billion in private and federal loans for 12 million people - touching about one in four student loan borrowers.
Provisions in these bills will certainly go a long way toward preventing the kinds of abuses and violations by lenders like Navient that have helped contribute to New York’s $82 billion in student loan debt.
But what about borrowers in the state who have already defaulted on their student loans? Where does the person who lost his job and doesn’t know how he will make payments on his loan go for help? The fact that someone is in default on their loan is a strong indication that the loan servicer did not do a good job first place. Yet, that’s where many borrowers are sent when they ask for help on their loan.
It’s critically important that we take steps to rein in the loan servicing industry. But it’s equally important that we help New Yorkers already burdened with student loan debt. One way to do that is to provide them with an independent advocate who will take on their case, and advocate on their behalf from start to finish.
Most student loan problems arise from lack of knowledge, not lack of resources.
That’s why CSS proposes the creation the Student Loan Consumer Assistance Program (SLCAP), a comprehensive statewide program designed to tackle the serious problem of student debt. The program would provide 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 and nationally known Community Health Advocates (CHA) program which CSS has run since 1999. The CHA Program provides consumer health insurance assistance services to hundreds of thousands of consumers through a toll-free helpline and a consortium of CBO’s. In a similar fashion, SLCAP will utilize CHA’s innovative “hub and spokes” service approach in which a Student Debt Helpline, staffed by professionals and highly trained volunteers, will be established to increase its reach and facilitate access to services for working individuals and those not able to travel to a service location. A network of organizations in communities throughout New York State will also be created for borrowers who require additional, in-person assistance.
CSS proposes the implementation of a small fee somewhere in the student loan process – perhaps at loan origination, or somewhere else in the loan process– to generate the revenue needed to operate SLCAP. Because there are millions of student loans in New York State, even a fee as small as $5-10 per loan—paid either by the lender or the loan recipient -- could generate $5 to $10 million to support the program and provide this free service to every loan consumer in the state.
Considering the thousands of dollars in unnecessary interest and fees borrowers are often paying due to unscrupulous lender practices, this very small investment would pay huge dividends for New Yorkers struggling with student loan debt.
Thank you for the opportunity to testify, and I would be happy to respond to any questions you may have.