(The Center Square) - A bill that would strengthen protections for Colorado students who take our private student loans cleared the Senate Education Committee on Thursday.
SB21-057, also known as the "Student Loan Equity Act," requires private lenders to grant releases to co-signers under certain conditions, expands disability discharge requirements, prohibits "robo-signing" of documents, and provides legal recourse for borrowers who fall victim to predatory lending practices.
The bill is sponsored by Sens. Faith Winter, D-Westminster, and Julie Gonzales, D-Denver.
"Private student loan lenders have been using predatory practices to take advantage of borrowers for years," Winter said in a statement. "And as people struggle to find work during the economic downturn, this issue has only been exacerbated.
"If we are going to successfully recover our economy following this devastating pandemic, we need to provide protections for the hundreds of thousands of Coloradans who are crippled by student debt and allow them the space to forge a path towards financial freedom," she added.
According to Student Loan Hero, a division of LendingTree.com, Colorado students owe a cumulative $29.3 billion in federal and private student loan obligations. There are approximately 800,000 borrowers statewide, and their average monthly payment is $307.
To help reduce the burden for borrowers, the bill would require lenders to release co-signers at the borrower's request after 12 consecutive months of on-time payments. If passed, it would also give co-signers the right to inspect all of the loan records and documents.
For Gonzales, the legislation represents a chance to help communities that have been hurt the most by predatory student loan lenders.
"Paying back student loans should be fair and transparent, yet student borrowers and their families are continually exploited by predatory lending practices, exacerbating racial disparities and inequity," Gonzales said in a statement.
"This bill will protect vulnerable and marginalized borrowers in Colorado - giving people a chance to fight for their economic future," she added.
Under state law, borrowers have few options for recourse against predatory lenders. Meanwhile, lenders can use "robo-signing" - a practice used in collections lawsuits - to bring legal action against borrowers.
SB-057 prohibits this practice and instead requires "specific evidence of loan origination and chain of ownership of the debt before a loan creditor or collection agency may commence legal proceedings."
The bill would give borrowers who were victims of predatory loan practices a legal avenue to recoup damages. Successful legal actions brought against private lenders can seek both punitive damages and injunctive relief, according to the 35-page document.
SB-057 will make its next stop at the Senate Finance Committee later this month.