Five months after the D.C. Council created a position to oversee student loan collection companies, the role remains vacant, blocking off a potential resource for students borrowing loans to fund their education.
The student loan public advocate position within the D.C. Department of Insurance, Securities and Banking would prevent loan service companies from taking advantage of borrowers unfamiliar with the repayment process. Experts and advocates said the position is necessary to protect loan borrowers living in the District from service companies’ predatory practices that squeeze more money than necessary out of borrowers.
The advocate – known as the ombudsman – will ensure all student loan providers have licenses to operate in the District and field student complaints against the companies, Chanda Washington, a spokeswoman for the Department of Insurance, Securities and Banking, said. The department combined the position with another role focusing on addressing foreclosures, requiring the official to have knowledge in both fields, which activists said has delayed the hiring process.
Ari Schwartz, a lead organizer for the social justice advocacy group DC Jobs with Justice, said the setup is a mistake because the advocate cannot focus attention only on student loans.
“The longer they take, and the longer that they wait, to find this person and setup regulations of student loan servicers, the more that people at George Washington and students who are thinking about going to school here in the District are going to be without a resource to inform them of what their rights are with student debt,” he said.
Schwartz said licensing loan providers is a “game changer” because the District will have the ability to prevent companies from defrauding borrowers by removing their license to operate in the city.
Currently, loan borrowers have to navigate the loan repayment process without a point person giving loan servicers the opportunity to give instructions that generate revenue for the company rather than benefit the borrower, experts said. Filling the position would provide residents an outlet for objective repayment information and complaints, experts said.
Nationwide loan service companies have been repeatedly accused of mistreating borrowers. The Consumer Financial Protection Bureau filed a lawsuit against Navient, the country’s largest servicer, in January for allegedly disregarding borrower requests for payment plans and deceiving borrowers into paying more expensive repayment plans, according to the bureau’s press release.
The Council’s legislation calls for the public advocate to develop a student borrower bill of rights by October. Some states, like Connecticut, have created a student loan position along with a borrower’s bill of rights, which prevents servicers from misrepresenting fees and providing incorrect information to credit bureaus.
Washington said the ombudsman will conduct educational outreach providing courses for borrowers to help them understand and manage their loans. Filling the position has taken five months because the department is working through the regular personnel services, she said.
“The department is working to fill the position as quickly as possible – however, it will take the necessary time to ensure the right candidate is selected for this important position,” she said in an email.
Washington said the public advocate will serve D.C. residents who are student loan borrowers or non-residents legally responsible to pay their loans. The student loan borrowers can be current students or graduates.
She added that the positions will manage both student loans and foreclosures because the two fields face similar issues.
Katrina Forrest, At-large Council member David Grosso’s legislative director, said the department merged the foreclosure and student loan oversight when creating the position over budget concerns.
“We are limited in what we can do. Hiring positions is an executive function. We don’t have the authority to do that,” Forrest said, referring to the Mayor’s office.
The department overseeing the position stopped accepting applications April 24 to review applications and interview candidates, she said.
Michael Walker Jones, an assistant commissioner in the Office of the Postsecondary Commissioner which oversees public higher educate in Rhode Island, said combining a foreclosure and student loan oversight position into one role could pose a problem because there is a different set of regulations for each industry.
“Having that person have to switch hats on every single call is not only disruptive to the agency but also is very confusing sometimes for the individual,” Jones said.
Benjamin Barrett, an education policy expert at New America, said typically students who attend universities with high graduation rates, like GW, are not the ones struggling to repay their student loans.
“The students having the most trouble are the ones going to community college at for-profit institutions and colleges where graduation rates don’t tend to be high,” Barrett said.