Consumer advocates applaud designation of Student Loan Ombudsman for New Jersey

Consumer advocates applaud designation of Student Loan Ombudsman for New Jersey

 

HIGHLAND PARK – New Jersey Citizen Action and other consumer advocates today applauded the Murphy administration and the New Jersey Department of Banking and Insurance (DOBI) for designating a Student Loan Ombudsman to assist student loan borrowers and help resolve disputes with student loan servicers.

Raghu Kakumanu, Assistant Division Director of Banking, within the New Jersey Department of Banking and Insurance, was announced as the Student Loan Ombudsman on Friday. Kakumanu leads the Office of Consumer Finance through which student loan inquiries and complaints will be processed.

The designation of the Student Loan Ombudsman is part of a law passed last year requiring student loan servicers to be licensed and regulated by DOBI. The law gives the state tools to protect student loan borrowers from mistreatment by student loan servicers. Under the law, DOBI will make information and assistance available to borrowers who have concerns about their student loans, including through the creation of a Student Loan Ombudsman within the department.

“Naming a Student Ombudsman could not come at a more critical moment,” said Beverly Brown Ruggia, Financial Justice Organizer for New Jersey Citizen Action. “Having the Ombudsman in place and DOBI staff focused on protecting student loan borrowers from unfair and deceptive practices by the student loan servicing industry, will help thousands of students manage their student debt without fear of mistreatment. The Ombudsman will educate borrowers about their rights and responsibilities, help them resolve loan disputes and act as an advocate on their behalf to lawmakers and the public. The Ombudsman and these new services will play a significant role in ending New Jersey’s $43 billion student loan crisis and in the recovery from the economic downturn caused by the pandemic.”

“Over a million student loan borrowers in New Jersey now have an advocate to stand on their side and make sure their issues are being heard and addressed,” said Seth Frotman, Executive Director of the Student Borrower Protection Center. “We applaud Governor Murphy, Commissioner Caride, and Senator Cunningham as they continue their efforts to ensure that New Jersey remains a leader in protecting student loan borrowers.”

“In the absence of effective federal oversight of student loan servicers, borrowers have been misled, had payments misapplied, and received faulty information,” said Yasmin Farahi, Senior Policy Counsel Center for Responsible Lending. “Servicers have failed to put borrowers in the income-based repayment plans for which they qualify. Student debt is among a host of societal problems that plague people of color disproportionately; 17% of New Jersey borrowers in communities of color have student debt in collections, compared to 7% in white neighborhoods. The realization of the essential Student Loan Ombudsman office comes none too soon, as heavy student debt loads will complicate recovery from our economic crisis for these families for some time to come.”

“Consumer Reports is thrilled that New Jersey is designating a Student Loan Ombudsman, and empowering the Department of Banking and Insurance to license and regulate student loan servicing companies,” said Chuck Bell, programs director for Consumer Reports.  “As shocking as it may seem, there currently is no effective federal supervision of student loan servicing companies.  As a result, about a quarter of borrowers nationwide are falling into delinquency and default, because they do not get the help they need to enroll in income-based repayment plans. New Jersey’s new Student Loan Ombudsman will help ensure that borrowers can get the help and information they need to navigate the complex repayment process. We commend Gov. Phil Murphy and DOBI Commissioner Marlene Caride for leading this critically important initiative, that will make a real difference in improving the financial well-being of student loan borrowers.”

DOBI is working with the Higher Education Student Assistance Authority (HESAA) to establish a student loan borrower education course and to provide materials to educate borrowers about student loans. Information on student loans, how to file a complaint with the department, and the new law may be found on the DOBI website here: https://www.state.nj.us/dobi/division_consumers/finance/studentloan/index.html

Student loan borrowers who are having issues with their student loans that they are unable to resolve with their student loan servicers, can file a complaint with DOBI by calling 1-800-446-7467 or online by going to the department website and clicking on Consumer Assistance – Inquiries/Complaints, at: https://www.state.nj.us/dobi/consumer.htm and completing the Banking Formal Complaint form.

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New Jersey Citizen Action is a statewide advocacy and social service organization that advocates for social, racial and economic justice for all while also meeting the pressing needs of low and moderate income New Jerseyans through education and direct service.

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