The same day President Barack Obama signed a memorandum directing federal agencies to do more to help student loan borrowers, the legislature’s Banking Committee passed legislation increasing regulation of lenders.
The Connecticut bill is just one of many addressing the student loan crisis. At a press conference Tuesday, lawmakers said they repeatedly heard on the campaign trail this fall about the college affordability issue and how it’s affecting families.
“Not only is debt rising at an astronomical rate, but it closes doors,” Rep. Matt Lesser, D-Middletown, said. “It limits economic mobility. It limits options for members of my generation. Frankly, it limits access to the middle class.”
An estimated 64 percent of Connecticut students graduate with debt and addressing the crisis is a priority for both the Senate and House.
Olivia Alsip, a senior at the University of Hartford, said her four years have been fraught with economic hardships. She said she was able to obtain scholarships and grants to cover about half her tuition, but with no family support it was up to her to make up the rest. She decided to take out several federal students loans over the course of her college career and will graduate in May with an estimated $35,000 in debt.
She said all the loans have different rules and compounding rates, which make it difficult to have a precise idea of debt.
“Students find themselves bound by student debt precisely when they should be taking risks and exploring and bettering themselves,” she said. “Education should be the start of a bright future, but for many of us we only have dark days ahead.”
With that in mind, members of the Higher Education Committee teamed up with members of the Banking Committee to craft a bill that increases regulation, education, and creates a student loan ombudsman’s office.
If Connecticut passes this legislation it will be the first state in the country to regulate student loan servicers, Lesser said.
“The same way that mortgage loan servicers are currently regulated, we’re going to require them to register with the Department of Banking,” he said.
The bill also creates a student loan ombudsman to assist students in resolving issues or filing complaints. The ombudsman would reside in the Banking Department and would be funded by fees levied on loan servicers.
Rep. Roberta Willis, D-Salisbury, also touted legislation that would allow the Connecticut Higher Education Student Loan Authority refinance eligible loans.
Federal student loan debt, which is what a majority of students carry, can’t be refinanced. The legislation would affect only the loans serviced by CHESLA. The Senate Democratic caucus introduced similar legislation, which would apply regardless of whether the loan was originally made by CHESLA..
“The soaring costs and debt levels that students and families are facing are simply staggering,” Senate President Martin M. Looney, D-New Haven, said Monday at another press conference. “Just six years ago, student loan debt made up the smallest portion of household debt. Today, it represents the largest portion of household debt other than mortgages.”
In order to remedy the situation, the Senate is proposing legislation that would cap administrative spending at the University of Connecticut and the Board of Regents, which oversees the four state universities and 12 community colleges.
Another bill would require UConn to submit information to the Office of Higher Education indicating how its financial aid is awarded annually, including to in-state and out-of-state students.