College should lead to opportunity, not financial ruin. Student loan debt has become a $1.6 trillion black hole and a full-blown crisis across the country – with New Mexican student loan borrowers being among the hardest hit, facing the second-highest rate of default in the nation.
Gov. Michelle Lujan-Grisham has proposed free college tuition in our state, which would go far in bringing down the price tag of attendance. However, right now, 218,000 New Mexicans are trying to pay back the money they borrowed to attend college. This existing $7 billion in student loan debt burdens both New Mexico’s rural and urban students, from teenagers to seniors.
Alarmingly, when borrowers try to repay their loans, they’re facing roadblock after roadblock from their loan servicers. Student loan servicers are legally responsible for providing people with correct repayment information and helping borrowers access the affordable repayment plans they have a right to under federal law. However, complaints to consumer protection agencies show a systemic practice of steering borrowers away from these plans and leaving them in even greater debt. For example, a lawsuit against Navient, one of the largest loan servicers, showed that these practices have cost borrowers nationally $4 billion.
These companies are almost completely unregulated, and borrowers are navigating a complicated repayment process often defined by unscrupulous and predatory practices. From misapplied payments, to lost paperwork, to misinformation from customer service representatives, borrowers are fighting an uphill battle against servicers who cannot even get the basics right.
This legislative session, we can join nearly a dozen other states in making the student loan market fairer for New Mexicans. Now is the time for our leaders to institute meaningful reforms and protections to ensure borrowers can get out of debt and prosper financially.
Student debt and abuses by loan companies are keeping New Mexicans from economic mobility and pursuing a career in their chosen field. Thousands of New Mexicans are missing out on the ability to buy a house, save for retirement, start a business or even start a family. But the impact is even broader than that – student debt drives income, wealth and racial inequality across our state.
These predatory practices cost New Mexico borrowers thousands of dollars every year. Teachers are getting saddled with debt that should have been discharged. Military members are being blocked from accessing the financial protections they earned through service to our country. Communities of color are often hit the hardest by predatory lending practices and disproportionately face loan servicing breakdowns.
The federal government has largely walked away from the nation’s student debt crisis, casting thousands of New Mexicans aside in the process. Not only has the federal government halted efforts to protect student loan borrowers, it has turned a blind eye to predatory collection practices and enabled bad actors to harm borrowers.
Unlike mortgage, credit card and even business loan servicers, student loan servicers have no state or federal oversight. These companies have demonstrated a pattern of sloppy and harmful practices that increase their profits while harming every type of borrower, with every type of loan, at every stage of repayment. These days, it’s hard to find any New Mexican participating in higher education who hasn’t been impacted by this crisis.
Adopting a New Mexico Student Loan Bill of Rights would provide student borrowers with the same protections our state has for other lenders, and help families and communities avoid financial ruin. It would require student loan companies to be licensed and regulated by our state – just as we have long required of mortgage servicers and other debt collectors.
New Mexicans have taken on historic debt in the hope of furthering their education and supporting their families. We deserve better. Our state must join the fight to end the student debt crisis and stand up to protect New Mexicans.