Rep. Bentz Bill Would Create Ombudsman to Address Predatory Student Loan Practices

DOVER – Citing a dramatic growth in student loan debt and defaults, Rep. David Bentz introduced legislation Thursday that would protect Delawareans from predatory student loan servicing practices.

According to the White House, approximately 70 percent of students earning a bachelor’s degree graduate with debt, which averages nearly $30,000. In Delaware, an estimated 129,000 residents have student loan debt. Delaware ranks first among states with the highest average student debt total, with the average student graduating with nearly $34,000 in student loans. That is a 129-percent increase in average student debt totals from 2004, when the average student graduated with $14,780 in student debt.

House Bill 349 would establish a student loan ombudsman within the Office of the State Bank Commissioner to receive, investigate and assist with complaints and questions from student loan borrowers. Under the bill, the ombudsman also would analyze data trends from the complaints and questions received, analyze developments and make recommendations about further steps that could be taken to address the student loan crisis.

“This generation of college graduates and current students is being saddled with more debt than any previous generation. This burden is forcing young people to delay other major life decisions, such as buying a house and starting a family,” said Rep. Bentz, D-Newark/Bear. “I was fortunate, but many other young people run into problems with unscrupulous student loan servicers. Others just have questions or other concerns.

“There needs to be an avenue for these students and graduates to get the answers they need and address their complaints. We as a state owe it to future generations to make sure they aren’t unnecessarily saddled with debt that they could avoid by asking a question. By creating a student loan ombudsman, we will give borrowers easier access to the information they need to make good, sound decisions and confront any problems they face.”

Under HB 349, the ombudsman also would also create a student loan education course to ensure potential and current borrowers have complete information regarding key loan terms, documentation requirements, payment obligations, income-based repayment options, loan forgiveness, and disclosure requirements so that borrowers are able to make wise financial decisions.

HB 349 has been assigned to the House Education Committee.