New bill would create ‘student loan ombudsman’ for Delaware

Delawareans struggling with student debt and predatory loan practices may soon have a new ally.

A bill introduced Thursday in the State House would create a “student loan ombudsman.” It would be among the first position of its kind in the country, according to legislative staffers. The ombudsman would field questions from borrowers and investigate bad behavior by student loan servicers.

“There needs to be an avenue for these students and graduates to get the answers they need and address their complaints,” said bill sponsor David Bentz, D-Newark/Bear, in a statement. “We as a state owe it to future generations to make sure they aren’t unnecessarily saddled with debt that they could avoid by asking a question.”

The ombudsman would also look at trends in borrower complaints and use that analysis to make policy recommendations. Finally, the ombudsman would create a class to educate current and future borrowers on the intricacies of the student loan system.

Delaware would be among the first states to craft such a position.

Connecticut recently created a student loan ombudsman. There is a federal ombudsman’s office within the U.S. Department of Education and a student loan ombudsman with the Consumer Financial Protection Bureau (CFPB).

An estimated 121,000 Delawareans have student loan debt totaling over $3 billion, according to a 2015 report by the White House.

Student loan servicers have come under heavy scrutiny in recent years. A 2015 report by the CFPB found “serious questions about whether more than 41 million American consumers with student loan debt have access to the services, information, and protections they need in order to lead healthy financial lives.” The report found a lack of consistency among servicers, the companies who act as middlemen between borrowers and lenders.