AUGUSTA — Hilary Manuel was facing a bleak employment landscape when she graduated from the University of Southern Maine in 2009, so she decided to go on to graduate school at Suffolk University in Boston to improve her odds of finding a job.

That worked, but even so she was not making enough to cover her $1,200-a-month student loan payments. She consolidated some of her loans but found it difficult to work with the companies that the federal government was paying to service them. The servicing fees and late fees added to her debt, even as she was regularly paying on the loans. She is now in an income-based repayment plan, but she isn’t sure how long she’ll remain eligible.

“When I left my graduate program, I was $96,000 in debt,” Manuel told the Legislature’s Health Coverage, Insurance and Financial Services Committee on Tuesday. “That was eight years ago, I’m now $106,000 in debt.”

Other student borrowers told lawmakers similar stories of becoming strapped with student debt and unresponsive servicing companies, even when they tried to make payments on their loans.

Their testimony came at a public hearing on a bill that would create a state-level student loan ombudsman within the Maine Bureau of Consumer Credit Protection, an agency in the Department of Professional and Financial Regulation. The bill, sponsored by Sen. Eloise Vitelli, D-Arrowsic, also would establish a list of prohibited practices for those who service student loans in Maine, “including employing any scheme, device or artifice to defraud or mislead student loan borrowers.”

In all, Mainers owe nearly $6 billion in student debt, according to a 2017 report of the federal Consumer Financial Protection Bureau. Nationally, 44 million Americans owe $1.5 trillion in student debt, said Seth Frotman, the former student loan ombudsman at the federal Consumer Financial Protection Bureau under the administration of President Trump.


“That is more than all credit cards combined; more than all auto loans combined,” Frotman said in testimony before the committee.

Frotman now heads the Student Borrower Protection Center. He resigned his former federal post in protest of Trump administration policies on financial services accountability and said Tuesday that states need to take action to protect student borrowers because the federal government is turning its back on them.

“As the former top regulator for this market, I’m here to tell you we are at a crossroads,” Frotman said. “Down one path, our leaders choose to stand up for the millions of Americans struggling under the weight of historic debt. Down the other, the student loan industry has free rein to run roughshod over a generation of student loan borrowers.”

Lawmakers heard from several student borrowers who said that when they became unable to make minimum payments on their student loans they were not helped by the companies, often working for the federal government, to service the loans and instead ended up even deeper in debt and on the brink of defaulting on their loans.

Vitelli said one in five Mainers carries student debt and the median debt amount is $17,876. She said she has heard from constituents in her Senate district and from borrowers across the state about the unfair practices of companies servicing student loans.

Vitelli’s legislation would create the ombudsman’s office, require licensing for loan servicing companies and mandate that they follow some of the rules already spelled out in federal law.


“Federal and private student loan borrowers of all ages report difficulty getting the information they need – accurate, timely, honest information, that enables them to responsibly repay their loans and satisfy their obligations,” Vitelli said.

About half the student debt owed by Mainers is the result of fees or increased interest costs for repayment plans that lower payments but tack on interest, according to Susan Feiner, a retired USM professor of economics. Feiner, who taught a course on the student loan industry, said the odds are stacked against the borrower, despite regulation by the government.

“These loans are set up in such a way that mistakes by the servicers throw these loans in situations where fees and late fees and so forth get piled on,” Feiner said. “Then those fees are capitalized, they are rolled into the original principal, so you are now paying interest on a higher amount.”

Feiner said there was no limit on how many times a servicer could do that over the course of a loan or even over the course of a single year.

“People who have borrowed $10,000 and have paid back $20,000 get bills that say they owe $10,000 more,” Feiner told the committee. “Without this ombudsman’s office there is no recourse for these people. There is no place to go. They are tiny little specks of sand relative to the economic power of these student loan servicers.”

Others backing the bill include state Senate President Troy Jackson, D-Allagash, who told his own story of dealing with student debt for his wife and his son.


“All across the country student loan companies are taking advantage of working people trying to secure a better future for themselves and their families. That is despicable,” Jackson said.

There was no opposition testimony on the bill Tuesday.

Vitelli’s bill will be the subject of a work session before the committee in the days ahead before going before the full Legislature for additional consideration.

Scott Thistle can be contacted at 791-6330 or at:

Twitter: thisdog




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