Student Loan Protections Bill Passes Major Legislative Hurdle

SACRAMENTO, CA – Legislation to provide consumer protections for students with institutional debt – debt owed to an institution of higher education – was approved by the Senate Judiciary Committee today, sending the bill to the Senate Appropriations Committee. 

"After more than a year of dedicated advocacy and collaboration, I am thrilled to announce that the Senate Judiciary Committee cleared AB 1160, the Protecting Students from Creditor Colleges Act," said Assemblywoman Blanca Pacheco (D-Downey), author of the legislation. 

“The institutional debt crisis has long been overlooked,” she added. “During the first two years of the COVID pandemic, more than 750,000 low-income students owed more than $390 million to California public colleges. We can and must do more to protect California’s students.”

Most of this debt is incurred when a student withdraws from a course before the end of the term and their school is required to repay federal student aid, such as a Pell Grant and federal student loans. Those returned funds then convert to debts that students owe directly to their school. Because Pell Grants are awarded based on financial need, these debts tend to fall on low-income students, who are more likely to be from marginalized communities.

Assemblywoman Pacheco said that unlike federal student loans and other privately held debts, students with institutional debt lack many basic consumer safeguards. The Protecting Students from Creditor Colleges Act aims to shield students from the economic harm associated with institutional debt and extend critical consumer protections.

“AB 1160 will help students reenroll in their coursework while they work to get on track with their institutional debt," said a spokesperson for the Campaign for California Borrowers' Rights. “The bill also establishes necessary guardrails on the use of third-party debt collections and tax benefit offset while allowing schools to bring in revenues and will increase transparency so policymakers and researchers can do their jobs to protect students and families.”

“Provisions of the bill align student debt collection protections with those for medical and other debts under California law,” explained Assemblywoman Pacheco. “Students already face numerous barriers as they work to earn their degrees. Institutional debt should not be another one.” 

To schedule an interview with Assemblywoman Pacheco, contact Alina Evans at 831.331.8468.