Iowa Legislature takes up concerns with student loans

Two bills try to address student-loan issues in different ways.


Ben Allan Smith

The Capitol building in Des Moines is pictured on Saturday, April 29, 2018.

Emily Wangen, Politics Reporter

Update 4/8: Iowa Gov. Kim Reynolds signed SF 304 into law Monday following unanimous passage through both chambers of the Iowa Legislature. It was introduced in mid-February, passed the Senate on March 15,  and passed by the House March 26.

Two bills in the Iowa Legislature would help student-loan borrowers in different ways, one with the implementation of a student-loan ombudsman and another would eliminate licensing sanctions against borrowers who are delinquent or default on their loans. These proposals have drawn bipartisan support.

SF 539 from the Senate Education Committee would establish the Office of Student Loan Ombudsman in the Iowa College Student Aid Commission. The bill was voted out of committee and awaits consideration by the full Senate.

Elizabeth Sedrel of the College Student Aid Commission said that currently, student-loan borrowers have to go straight to their loan provider with complaints. The ombudsman, she said, would act as an intermediary between the two.

“Sometimes, students don’t even know who their lender is,” Sedrel said. “Sometimes, they need help with something as basic as figuring out who they actually owe the money to and how to talk about a payment plan.”

A fiscal note from the Legislative Services Agency estimated the implementation of the office would cost $105,000 in fiscal 2020 with annual cost increases of 2 percent in subsequent years. The funds would go toward the salary for a full-time equivalent position, benefits, and overhead expenses.

She said that currently, there is a team that addresses student-loan complaints that sometimes gets questions about borrowers’ loans, but noted those people are directed to speak with their loan provider.

“It would provide another resource for students who need help with these questions,” Sedrel said.

RELATED: State Board of Regents discuss student loans, financial debt

According to 2015-16 data from the National Center for Education Statistics, 48 percent of undergraduate students attending Iowa’s three public universities — Iowa State University, the University of Iowa, and the University of Northern Iowa — were awarded federal student loans. The average amount of those loans total more than $6,000 per student.

Private not-for-profit institutions had an increased rate with 68 percent of undergraduate students receiving federal student loans.

According to the 2018 State of Higher Education in Iowa report published by Iowa College Aid, Iowa ranked 19th in the U.S. for average student-loan debt upon graduation from four-year colleges and universities in the state for 2016.

The average student-loan-default rate in Iowa for all institutions is 12.6 percent, according to data from the U.S. Education Department. Community-college graduates saw the highest rates of default with 18.3 percent.

Under current law, licensed employees could have their licenses suspended or revoked if they fall behind or default on their student loans.

SF 304 by the state Senate committee on Labor and Business Relations tries to address this issue. The bill would prohibit state licensing boards and the educational examining board from suspending or revoking licenses solely based on defaulting or delaying payment on state or federal loans, Sen. Waylon Brown, R-Ansgar, said on the Senate floor when introducing the bill.

House floor manager Rep. Ray Sorenson, R-Greenfield, said he believes the bill will pass the House with flying colors and has been a bipartisan issue.

“Sometimes there’s an unintended consequence or two that somebody has constituents that are up in arms about it for some reason, but I haven’t heard any of that,” Sorensen said.

SF 304 unanimously passed the Senate March 11 and is currently awaiting consideration by the House before it goes to Iowa Gov. Kim Reynolds to be signed into law.

“It’s kind of counterproductive to take away someone’s occupational license when you want them to pay back debt,” Sorensen said. “Why would you take away their source of income?”

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