Trenton – In response to the country’s student debt crisis, the Senate Budget and Appropriations Committee today approved legislation sponsored by Senators Sandra Cunningham and Vin Gopal which would require registration of private education lenders and establish protections for private education borrowers.
“Regulation and oversight of private student loan lenders is long overdue,” said Senator Cunningham (D-Hudson), who chairs the Senate Higher Education Committee. “People who are struggling financially are often enticed by the low-interest rates offered by private lenders, not realizing they do not offer the same protections as federal loans. This legislation will ensure those who refinance, or those who choose to go back to school after this public health crisis, are fully protected.”
The bill, S-2358, would require the registration of private education lenders and establish protections for student borrowers with private loans. Currently, New Jersey borrowers owe an estimated $9 billion in outstanding student loan debt.
“Over 90 percent of undergraduate private student loans are cosigned by parents, and there have been thousands of instances where they have be rejected for cosigner release or were unable to receive documentation of their cosign upon request,” said Senator Gopal (D-Monmouth). “This has caused parents to take on the burden of their child’s debt, leading older consumers to become the fastest growing population of student loan borrowers. We must ensure protections are put in place so both students and their families can avoid being exploited by private lenders.”
The bill would set new standards for the servicing of cosigned private student loans. It would require more robust disclosures, ensure cosigner release is accessible to all borrowers and require cosigners to have access to all documents related to the loan, among other things. New Jersey currently has more than 130,000 older borrowers, who are most often co-signers helping their children or other relatives attend school.
Since 2008, the private student loan market has grown exponentially faster than other loan markets, including mortgages, auto loans, and credit cards. Students are progressively becoming less likely to borrow from the federal government, and more likely to seek out private lenders. While private lending has become more commonplace, there are little to no regulations or safeguards in place to protect students and their families, our sponsors said.
Under this bill, New Jersey students would have the most extensive protections in the country in place if they choose to borrow through a private lender. The bill also includes additional protections to expose predatory lenders and allow borrowers to hold them accountable.
The bill was released from committee by a vote of 8-3.