Seth Frotman was traveling from the East Coast to California recently when he had a realization: The amount of new student loan debt that borrowers in the Golden State had racked up over the past year was equal to all the student loan debt in the state of Maine.

Frotman spent years dealing with the fallout of the education debt crisis as the student loan ombudsman for the federal Consumer Financial Protection Bureau before resigning in protest in the wake of President Donald Trump’s election. Now he’s bringing his borrower-protection crusade to California.

The state’s massive population and reputation for consumer protection, he says, make it the perfect laboratory for testing whether more regulation of loan servicers can help keep student debt from mushrooming.

About a tenth of the nation’s $1.5 trillion in student debt is held by Californians, according to data compiled by Frotman’s non-profit, the Student Borrower Protection Center. The group is sponsoring a bill in the Legislature that would establish a borrower’s bill of rights, hire a state borrower advocate to respond to consumer complaints, and monitor loan servicers’ performance.

Carried by Assemblyman Mark Stone, a Democrat from Scotts Valley, the legislation wouldn’t keep students from taking on debt, but Frotman believes it could combat the kinds of servicer abuses he says he saw while working for the federal government.

“This is a generation that gets a bad rap,” said Frotman. “Oh, you have too much student debt because you eat too much avocado toast. But that couldn’t be further from the truth.” 

The 60,000 student borrower complaints Frotman and his team handled, he says, “reflected people desperately trying to pay their bills and running into traps at every point.”

Among the problems Frotman documented? Companies applying payments in a way that increased fees and interest. Borrowers who were transferred to a new servicer and no longer got credit for payments they’d already made. Borrowers who were eligible for an income-based repayment plan but didn’t… (continue reading)