Maine is the most recent state to pass a student loan bill of rights. It requires licensing of companies who service student loans in the state, unless that company is already a financial institution under state or federal regulatory authority. More important, it requires student loan servicers to do the following:
- Respond to borrower inquiries within 30 days and, where applicable, make necessary corrections or explain why corrections aren't being made.
- Correctly apply loan payments.
- Apply partial payments in such a way as to minimize the accumulation of interest and fees.
- Refrain from engaging in any unfair or deceptive trade practices.
I think this law is fantastic. I've been saying for years that student loans need to be subject to a RESPA-like set of regulations that requires servicers to be more responsive to the inquiries of student loan borrowers. The people who call me frequently have no idea whether their loan is federal or private, who originated the loan, or how the balance was calculated. If the federal government isn't going to take the lead on protecting borrowers, it's good to see the states stepping in. Hopefully Minnesota takes something like this up during the next session.