Student loan debt in California has surpassed $148 billion and Sacramento wants to help.
A new program created by California's consumer protection agency aims to provide free, personalized help to Golden State borrowers struggling to navigate the complex and byzantine student loan system.
The Student Loan Empowerment Network is designed to provide financial counseling and assistance to borrowers, including help securing income-based repayment plans and federal student loan forgiveness for those working in public service positions.
“The student loan system is riddled with systemic problems that make it virtually difficult, if not impossible, for people to obtain the rights and benefits to which they are supposed to be entitled under the law,” said Suzanne Martindale, principal deputy commissioner for protections. consumer finance at the California Department of Financial Protection and Innovation.
Martindale said that in many cases, borrowers may be eligible for some type of credit relief, but they don't know how to access it because “the information hasn't been clear, because the goals keep changing, because loan servicers don't seem to be able to give you a precise answer.”
“People need a place to turn to get accurate and fair information, working with someone who has their best financial interests at heart,” Martindale said.
Borrowers who want help from the program can fill out an intake form at Studentloanhelp.dfpi.ca.gov or call (888) 774-2227.
Borrowers will be connected with a financial counseling agency or legal aid agency. In Los Angeles, these include Public Counsel, the Legal Aid Foundation of Los Angeles and the Koreatown Youth & Community Center.
The program will offer a combination of webinars and financial advice sessions. Some borrowers with “very complex legal issues” may need personalized help, including those who have older private loans from defunct issuers or who have defaulted on their loans, Martindale said.
Gov. Gavin Newsom's 2022-2023 budget set aside $7.25 million for the education and student loan assistance program and $2.25 million for a statewide marketing campaign.
Organizations working on the loan program will need to track the number of people who switch to income-based repayment plans, document their employment for public service loan forgiveness and pay off their loans, Martindale said.
Helping Californians reduce their loan burdens through publicly available programs can have a significant economic benefit for the state, he said. He said he hopes the program becomes a permanent fixture in the state, although the looming deficit makes it less certain.
After the pandemic-era freeze on student debt expired last year, about 40% of borrowers with federal student loans missed their first monthly payment last fall, according to federal data.
Borrowers delinquent on their federal loans will not be reported to the credit agencies until September 30 of this year, but in the meantime, interest continues to accrue.
