As graduate students at the University of Southern Maine, we want to bring to your attention an important issue affecting a considerable number of Mainers: the lack of regulation of private student loans.

In 2023, more than 191,000 Maine residents had student loan debt; 12.6% of those borrowers carry $800 million in debt from private student loans, which, for many, is the only option to finance their education. The unfavorable terms and lack of protection of private student loans create a significant burden on students and their families, perpetuating social inequities.

We realize that efforts are being made by our government to address the current student loan debt crisis; however, little attention has been given to the escalating hardship of private student loan borrowers. Currently, private loan terms and regulations are dictated by private lenders, such as banks or credit unions, who can make their own rules about who qualifies, how much they can borrow, and what the interest rates will be. Additionally, private loan borrowers are not eligible for loan forgiveness or income-based repayment programs. Many lenders also require a co-signer, which extends the burden of the debt to other family members or friends. These factors compound the difficulties experienced by private loan borrowers, who are left with little recourse in times of economic hardship.

The government played a major role in unleashing Sallie Mae and the private student loan industry in the late 1990s, without offering any measures of protection to vulnerable borrowers and their families. We believe that our legislators have a responsibility in protecting future private student loan borrowers and helping the ones who are currently suffering hardship, through reforms and by imposing strict regulations on private lenders.

We urge our legislators to consider the following measures:

• Impose an interest rate cap on private student loans for all borrowers, a protection that is currently offered to servicemembers and veterans.


• Prohibit compound interest for student loans, at least while borrowers are in school

• Require private lenders to only offer fixed rates for student loans, ensuring borrowers have predictability and are protected against future rate hikes.

• Prohibit lenders from requiring a co-signer for private student loans, to prevent the debt hardship from extending to other family members.

• Advocate for stronger protections for private student loan borrowers by making repayment plans and rehabilitation programs mandatory.

• Support efforts to facilitate the discharge of student loan debt under certain circumstances, making undue hardship less difficult to prove when debt is an insurmountable burden.

• Train high school and college financial advisers to educate students about the difference between federal and private loans and advise them to maximize federal loans before considering private loans.

• Make community college tuition-free indefinitely, joining the list of the 20 other states that have already implemented such measures.

The private student loan debt contributes to the hardship of Maine’s residents, and the financial burden significantly impacts the well-being of the most vulnerable populations. The situation is keeping lower economic groups from reaching the middle-class, perpetuating disparity in our communities.

By addressing this issue, we are hopeful that not only will vulnerable borrowers have a better chance of repaying their debt, but they will also be able to thrive and contribute to our country’s economic health.

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