Have Student Loans? California Has Special Protections for You

It's called a new era for college students, with unique protections for the close to 4 million school loan borrowers in California. It's through the California Student Borrower Bill of Rights, which helps with both federal and private loans.

"What it did was add an additional layer of protection that was missing at the federal level," said Celina Damian, Student Loan Services Ombudsperson at the Department of Financial Protection and Innovation.

That extra layer created new standards for student loan servicers, making sure everything they do is in the best interest of borrowers.

The law went into effect in 2021 and requires that student loan servicers provide simple and accurate information, minimize fees, track records and not use deceptive practices.

The DFPI says a Californian with federal or private student loans has the following rights:

• Loan servicers must provide borrowers with accurate information about loan terms, repayment options and benefits.
• Loan servicers must process and post loan payments in a timely manner.
• Loan servicers must allocate any overpayments in a manner that is in the best financial interest of a student loan borrower.
• Loan servicers must minimize late fees – to not exceed 6% of any past due amount.
• Loan servicers must process paperwork in a timely manner.
• Loan servicers must respond to a borrower’s Qualified Written Request (QWR) within 30 business days.
• If a student loan is transferred, the original loan servicer must notify the borrower of these changes at least 15 days before a payment is due.
• Special protections are established for military borrowers, borrowers working in public service, older borrowers and borrowers with disabilities.
• If a loan servicer does not follow the terms above, a borrower can take legal action against them. This is called a “Private Right of Action.”

The department is also working to answer questions related to President Biden's recent loan forgiveness program. Damian said not all the details have been worked out.

"We're waiting to see what comes down the pipeline from the Department of Education," said Damian. "We work closely with them."

In the meantime, the DFPI said you should get all of your loan information together so you can be prepared.

"Find out who your service provider is," said Damian. "Make sure all your information is updated with the Department of Education."

If you do have student loans, watch out for scams that are starting to pop up.

"They know this is going on and they're trying to take advantage," said Damian. "They even reached out to me on my phone and I don't have student loans."