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Opinion: Colorado should take the lead on protections for private student loan borrowers

A bill in the state legislature would establish basic protections for borrowers and create increased accountability for predatory lenders.

A long-overdue national conversation is playing out now about the student debt crisis. That attention is well-deserved.

As a college education becomes increasingly necessary for young people to simply get an entry-level job, America’s debt-fueled approach to higher education has left tens of millions of people saddled with unaffordable student loans and has impacted students of color at disproportionately high rates. 

As a result, many borrowers here in Colorado and elsewhere have been held back from purchasing homes, starting families or starting businesses, creating a problematic ripple effect across our entire economy.

Seth Frotman and Morgan Royal

So far, however, the national conversation and federal policy solutions raised have left behind private student loan borrowers. Though they make up a smaller amount of the total loan debt owed, private loans — which usually carry higher interest rates and lack the same baseline consumer protections available on federal student loans — are some of the most predatory in nature and come with their own set of problems. 

Now, private student loan borrowers are navigating this system in the middle of a national economic crisis fueled by the COVID-19 pandemic. While many federal loan borrowers have received more than a year of interest-free forbearance, private borrowers are still left struggling to make payments as private lenders in many cases repeatedly ignore their pleas for relief.

Unlike borrowers with federal student loans, private student loan borrowers have no right to affordable repayment options. Moreover, when lenders do offer payment relief, it’s often predicated on which customer service representative happens to answer the phone, leading to important questions about who exactly is able to access relief. Private student loan companies are able to do this because they operate almost entirely out of the purview of state oversight.

The problems don’t stop there. Unsurprisingly, when borrowers do eventually default, private student loan collectors often take advantage of that lack of regulation to engage in questionable practices like robo-signing, a reckless automated collections practice most heavily associated with the 2010 foreclosure crisis. (While legislators took action to rein in mortgage lenders, the same has not been done for private student loan companies).

This issue is only getting worse in Colorado — in less than five years, private student loan balances for Colorado borrowers have grown by nearly 50%. 

Across the state and the nation, private student loans are exacerbating the racial wealth gap, trapping people of color in inescapable cycles of debt. In fact, Black borrowers struggle to pay back private loans at four times the rate of white borrowers. Tackling private student loan debt is an urgent racial justice issue.

Colorado has an opportunity right now to lead on this issue by passing Senate Bill 57, the Student Loan Equity Act. This bill, sponsored by state Sens. Faith Winter and Julia Gonzales, would establish basic protections for private student loan borrowers and create increased accountability for predatory lenders. 

Some examples of the specific provisions of the bill include protections for co-signers (such as parents and grandparents who sign on a private student loan), requiring companies to tell borrowers about all available repayment options, expanding access to disability discharge, ending robo-signing and other abuses in the courts, putting an end to predatory practices such as “auto defaulting,” and holding predatory players accountable.

The thousands of Colorado borrowers who owe billions in private student loan debt need us to take action. 

As a greater reckoning with the overall student debt crisis plays out, we must make sure they’re not left behind.


Seth Frotman, the executive director of the Student Borrower Protection Center, was assistant director and student loan ombudsman for the Consumer Financial Protection Bureau. Morgan Royal is campaigns director for New Era Colorado, a youth civic engagement organization, and studied Political Science and Women and Gender Studies at Colorado State University.


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