Senate enacts Sen. Vitelli bill to increase protections for private student loan borrowers and cosigners

AUGUSTA — On Friday, the Maine Senate voted to enact a bill from Sen. Eloise Vitelli, D-Arrowsic, that would increase protections for borrowers of private student loans and their cosigners. LD 1645, “An Act To Establish Protections for Private Student Loan Borrowers and a Registry of Lenders,” received unanimous, bipartisan support.

“Thousands of Mainers have found themselves buried under student loans after trying to get the education they need to advance their career. When they’re trying to do all they can to responsibly pay down this debt, we need our laws to ensure they’re treated fairly. Unfortunately, student loans, especially private student loan companies, have been largely unregulated,” said Sen. Vitelli. “I’m hoping this bill will help put an end to the many horror stories we’ve heard over the years of student loan borrowers being harassed and lied to by their lenders. I’m glad this bill has received strong support.”

More than 70,000 Mainers hold private student loan debt, with all Maine student debt holders owing an average of $32,788. During the pandemic, when many borrowers of federal debt have not had to make payments on the debt and have not accrued interest, many private lenders have not made similar accommodations. As students look to finance their education, parents and grandparents often step in to cosign on private loans. Nationally, the amount of student loan debt held by borrowers over the age of 60 increases by 50% every five years. As of 2018, more than 20,000 Mainers over the age of 60 owed student debt.

As amended, LD 1645 would require private lenders, except for state-chartered banks and credit unions, to register with the state, as the Student Loan Bill of Rights requires of other lenders. The bill prohibits lenders from placing loans into default or acceleration in most circumstances, except for payment default, and outlines other collection practices designed to protect borrowers and help them fairly pay down their debt. The bill also requires lenders to publish any flexible or alternative repayment options they offer, such as income-based repayment plans, and to offer these plans equally to all borrowers.

The bill also extends to cosigners of private student loans the same protections afforded to the primary borrower. Lenders must provide cosigners with the conditions of debt release upfront and must require no more than 12 consecutive on-time payments as a condition of release. The bill also requires lenders to discharge the debt, for both borrowers and cosigners, if the borrower dies or becomes totally and permanently disabled. If it is the cosigner who dies or becomes totally and permanently disabled, they must be released from the debt.

“For decades, financial companies have run roughshod over student loan borrowers simply because those people chose to pursue a better life for themselves and their families,” said Seth Frotman of the Student Borrower Protection Center in his testimony supporting the bill. “The legislation before you today creates protections for hundreds of thousands of borrowers across this state—your neighbors, your constituents—who took on debt to chase the American Dream, only to be left with very few rights and even fewer protections.”

LD 1645 now goes to the desk of Gov. Janet Mills, who has 10 days to sign the bill into law, veto it or allow it to become law without her signature.