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Advocacy group calls for state, local help for student loan borrowers

By Amy R. Connolly   |   Jan. 8, 2016 at 2:35 PM

WASHINGTON, Jan. 8 (UPI) -- A non-profit student advocacy group is urging state and local leaders to enact laws to protect student loan borrowers and hold the loan servicing industry accountable for its mistakes, sidestepping years of congressional inactivity.

Generation Progress, an arm of the left-leaning Center for American Progress, said local- and state-based solutions can help borrowers who are drowning in debt, including the creation of a borrower's bill of rights, establishing student loan ombudsmen and licensing student loan servicers.

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"The magnitude of the debt held, the increasing amount of debt per student, the spiraling costs of college and the lack of consumer protections for borrowers all reflect the urgency of the growing crisis," Anne Johnson, the executive director of Generation Progress, and Maggie Thompson, campaign manager for the Higher Ed, Not Debt campaign, said in the white paper.

"In the absence of meaningful and sweeping action at the federal level to address not just the current debt, but a higher education system that continues to produce it at rising levels, states and localities must step up to arrest the impact of student debt on their communities."

With $1.2 trillion in outstanding student loan debt nationwide, and a growing number of borrowers defaulting on loans, groups nationwide are pushing for help. College costs have hit record highs, leaving many wondering if a college degree is worth the expense. Economists say the trickle-down effect of massive individual student loans, which average about $30,000, is holding back the economy, preventing millennials from owning homes and having babies.

Generation Progress called for a crackdown on predatory for-profit schools, which generate a large amount of student debt. This was seen in the collapse of the for-profit chain Corinthian Colleges, accused of defrauding students and shuttering doors with out warning.

"Federal law requires that schools be authorized by an agency at the state level, but many of these state agencies have done little to police the activities of unscrupulous schools. Stronger enforcement and oversight by state authorities will help stop abuses before they become problems nationwide," the report stated.

States should create independent oversight bodies that approve schools to operate within their borders and operate with transparency, providing annual reports about inspections, examinations and sanctions, the organization recommended. State attorneys general should also designate an office accountable for overseeing and enforcing student protection, the report said.

"This office will work closely with other state and federal agencies, the Department of Education, and other stakeholders to monitor student complaints and pursue enforcement actions against law-breaking institutions," the report said.

Generation Progress also recommended creating state tuition recovery funds to allow compensation for schools that close unexpectedly, establishing free or debt-free college options and creating provisions that allow undocumented students to pay in-state tuition rates.

Generation Progress researchers called attention to recently passed state and municipality laws and policies that could serve as blueprints for the rest of the nation:

- Some local governments in Wisconsin and Ohio passed resolutions to ensure government employees would know about their right to public loan forgiveness.

- Wisconsin introduced a bill to allow borrowers to refinance student loans into a state student loan authority, possibly with a lower interest rate.

- The Montana state legislature repealed a law that allows the state to revoke borrowers' driver's licenses after defaulting on student loans.

- The New York City Council passed a law prohibiting employers from using credit checks to screen job applicants, an action that aims to ensure student loan debt is not a barrier for employment.

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