Student Loan-Related Laws
Assembly Bill 2251 (Stone, Chap. 824, Stats. 2016) This bill adds a new Division, the “California Student Loan Servicing Act,” to the Financial Code. The Act requires servicers to adhere to specified borrower protections when servicing student loans. The bill also expands the authority of the Commissioner of the Department of Financial Protection and Innovation to include the licensure, regulation, and oversight of student loan servicers. This bill prohibits a person from acting as a student loan servicer without a license, unless exempt.
Assembly Bill 461 (Muratsuchi, Chap. 525, Stats. 2017) This new law excludes from gross income, for taxable years 2017 through 2021, student loan debt that is canceled under income-contingent repayment plans for public service and other employees administered by the U.S. Secretary of Education.
Assembly Bill 1178 (Calderon, Chap. 448, Stats. 2017) This new law requires, commencing with the 2018-19 award year, that each higher education institution, except for the California Community Colleges, to the extent possible, send an individualized letter to their students regarding information on their student loans.
Assembly Bill 38 (Stone, Chap 379, Stats. 2018) This bill amends the Student Loan Servicing Act to clarify who is covered under the Student Loan Servicing Act, and to streamline the process for licensing and regulating student loan servicing in California. Among other things, the bill exempts guaranty agencies engaged in default aversion and debt collectors, as defined.
Assembly Bill 3212 (Irwin, Chap 555, Stats. 2018) This bill expands the service members who are entitled to certain protections in the Military and Veterans Code when on active military duty. The bill also expands the protections available to active service members regarding financial and other obligations including student loans.
Assembly Bill 376 (Stone, Chap 154, Stats 2020) Known as the “Student Borrower Bill of Rights”, this bill expands borrower rights in the following ways:
- Loan servicers must provide accurate information about your repayment. This includes giving information about expanded protections available to borrowers who may qualify for special benefits, such as public servants and people with disabilities.
- Servicers must provide clear answers to your questions. Servicers must give accurate information about their repayment options to avoid defaulting on their loans.
- Servicers and lenders must minimize their fees. Fees are capped at 6% of the outstanding amount.
- Servicers must apply all payments in a way that helps reduce the overall cost of the loan. This helps to minimize any fees or interest charges.
- Servicers must process and post payments in a timely fashion. Overpayments must be posted and processed in the best financial interest of the borrower.
- Servicers must maintain accurate records. Loan servicers must have better records management, process paperwork on time, and diligently oversee their service providers.
- Servicers must not engage in deceptive or abusive practices in connection with loan servicing. A borrower has the right to legal action against their servicer if they fail to comply with these laws. This is called a ‘Private Right of Action’ and allows borrowers to collect damages and restitution.