Last month a bill was signed into Washington State law that creates new protections for student-loan borrowers. The new law restricts private loan companies from operating without a state license issued by the Department of Financial Institutions (DFI), which regulates mortgage and consumer-loan brokers. Student-loan servicers will be required to follow the same rules as mortgage and consumer-loan industries, such as responding to requests for information expediently, providing notice of loan transfers, and refunding fees when the servicer is at fault.
The law also creates a student-loan advocacy office where Washington residents can call for information on how to best repay a loan, which loans to take out, and any other questions they have about the process. The Advocacy Office will provide educational sessions to better prepare those ready to take out loans for the reality of student-loan debt. According to the Seattle Times, the office will be run by the Washington Student Achievement Council, who sets policy for education in the state.
Washington is joining a growing list of states who are creating protections for student-loan borrowers. However, the Department of Education has been moving in the other direction, and a proposed new federal legislation is attempting to pre-empt state control and oversight of private loan servicers. The legislation would allow servicers more leeway and would take away states’ ability to help their citizens navigate the complicated borrowing and repayment procedures and protect them from misdoings by loan servicers.