Good intentions, bad policy: Illinois student loan bill misguided fix for broken system
With $1.4 trillion in outstanding student loan debt in the United States, state lawmakers are rightly exploring effective ways to improve the higher education financing system. Unfortunately for Illinois borrowers, the Student Loan Servicing Rights Act (SB 1351), which is currently on its way to Gov. Bruce Rauner’s desk, is misguided.
- The U.S. Department of Education (ED) issues or holds the lion’s share of all student loans, more than $1 trillion of the $1.4 trillion total.
- If SB 1351 becomes law, it would create contradictory state and federal directives for student loan servicers, diminishing their ability to serve Illinois borrowers clearly and effectively.
- Adding another layer of bureaucracy will not improve outcomes. Federal student loan servicers are already working hard to help borrowers repay; under the ED contracts, servicers are incentivized to keep borrowers in repayment and out of default.
- Better borrowing begins long before entering repayment and before servicers assume the management of loans.
- In neighboring Indiana, the state government mandated that public colleges send students an annual letter detailing the cumulative amount they have borrowed for their education.
- The 21 servicers that make up SLSA are committed to collaborating with policymakers at the state and federal level, including ombudsmen, to ensure borrowers can successfully manage their student loans.