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Delaware Senate Democrats

Sen. McBride, Rep. Phillips unveil Student Loan Borrowers Bill of Rights

May 16, 2023

DOVER — To prepare for the June 30 end to a pandemic-era pause on student loan repayment, Senator Sarah McBride and Representative Sophie Phillips introduced consumer protection legislation on Tuesday that would establish a Student Loan Borrower Bill of Rights. Senate Bill 132 would create a series of protections for those who enter into financial aid agreements with student loan servicers. 

“A growing number of students are dependent on substantial financial aid loans to meet the rising costs of higher education,” Sen. McBride said. “Many of these borrowers are forced to make a massive financial decision by or before age 18 — one that can jeopardize their personal finances for decades to come. As our nation’s student debt crisis spirals out of control, there are concrete steps we can take at the state level to protect student loan borrowers as they navigate this burdensome process.”

Under SB 132, student loan servicers would be required to engage in clearer communications with student loan borrowers and cosigners of student education loans. The bill also would prohibit student loan servicers from engaging in unfair or abusive practices, such as deceptive marketing tactics or predatory collection methods. 

“As a recent graduate, I’m very aware of the issue affecting so many other young Delawareans: To work in their chosen field, they often need to get a degree, which means taking out student loans. The amount of debt young people carry is mind-boggling and can be crippling for a new graduate,” Rep. Phillips said. “By passing a bill of rights for these students, we can help them make better-informed decisions and avoid decisions that haunt them for years to come. I’m proud to sponsor this bill with Sen. McBride to help the next generation of students.”

To ensure that student borrowers are protected against predatory behaviors, SB 132 creates a few key enforcement provisions:

  • Creates an Office of the Student Loan Ombudsperson within the Consumer Protection Unit of the Delaware Department of Justice. The Ombudsperson will act as a neutral third party, mediating disputes, addressing complaints, and promoting proactive measures to prevent predatory practices in the student loan industry.
  • Requires student loan servicers to retain records related to student loan transactions for at least 7 years.
  • Requires  servicers to report non-identifying information about student loans serviced in Delaware to the Student Loan Ombudsperson on an annual basis. 

“Whether you’re a student borrower or not, student debt and the heavy weight it places on disposable income impacts you,” Attorney General Kathy Jennings said. “Loans have become a fact of life for many students, and student loans now comprise about 10% of all household debt in America. Those loans — which are typically taken on by teenagers — are substantial, potentially life-altering, and almost never dischargeable through bankruptcy.  The least we can do is ensure that Delawareans are treated fairly. I applaud Sen. McBride and Rep. Phillips for their work on this legislation and for championing the rights of student borrowers.”

With roughly 43 million student loan borrowers nationwide, more than 18 states have passed legislation to support student borrowers. 

SB 132 has been assigned to the Senate Education Committee.