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North Carolina Senate Bill 196 to ensure fair treatment for those with student loans

The North Carolina General Assembly building is pictured in Raleigh, N.C. on Jan. 13, 2013.

The North Carolina General Assembly building is pictured in Raleigh, N.C. on Jan. 13, 2013.

In early March, Senate Bill 196, the "Student Borrowers’ Bill of Rights", was filed in the N.C. Senate. If passed, the bill would create a license requirement process for lenders to help ensure fair treatment of student loan borrowers and their families. 

The bill would impose an application process on student loan servicers, which would include a certificate of good standing from the state, the applicant’s financial condition and the qualifications and business history of the applicant. If a loan servicer passes the application process, the commissioner of banks will give it a license. 

The primary sponsor of the bill, N.C. Sen. Rachel Hunt (D-Mecklenburg), said she is trying to set up parameters for student loan lenders to make sure they treat student borrowers well.

“Right now, there are no parameters at all," Hunt said. "So they can do things like mislead them, make sure they pay extraordinary fees and change the terms of the loan.” 

Hunt is also a college counselor, which she said is a reason for her interest in the bill. 

“I’ve seen through my own students, what student debt is doing to people and how it destroys lives,” Hunt said.

Hunt said lenders currently do not look into income-based repayment programs or public service loan forgiveness programs for people who are not able to pay their student loans. Instead, the lenders immediately put those people in default, which is the source of much of the trouble with student loans, she said.

The bill would prohibit lenders from providing information about a disputed payment to a consumer reporting agency until 60 days after a written inquiry from the borrower. Hunt said the information given to a consumer reporting agency can affect a borrower's credit score.

James Mwombela, a student loan advisor who consults for Student Loan Planner, said the bill could allow borrowers to avoid costly mistakes.

Student Loan Planner is a company made up of financial consultants who have their own financial planning practices. They sometimes consult people looking to take out student loans, but mostly consult those working to pay back their loans, Mwombela said.

“Servicers have no incentive to help people pay their loans off faster, in fact, the servicer gets paid a fee for the outstanding balances that they service,” Mwombela said. “It's actually in their interest to keep people in debt.”

Mwombela said one of the requirements of the bill is that lenders would be required to discuss all the repayment options with the borrower before putting them in forbearance.

Lily Gullion, a second-year Ph.D. student in occupational science at UNC, took out student loans for her bachelor’s and master's degrees.

“After I finished my master's degree, it was really hard to figure out career goals because I knew that I needed to stay within nonprofit agencies for the Public Service Loan Forgiveness,” Gullion said. 

Gullion said the forgiveness program has allowed her to pay her loans and rent, but it means that she can only take certain jobs and opportunities, which is limiting for her future career. 

“I think that this is definitely a step in the right direction,” Gullion said. "I think that students need to know their rights and need to know what this means long-term and understanding without false pretenses and what kind of burdens will be in their lives if they take out certain loans.”

On March 6, the bill was assigned to the state Senate rules committee where it will be reviewed. If it passes the committee, the bill will be voted on by the full N.C. Senate.


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