Financial Aid
Student Loan Servicer Licensing
In 2017, the Illinois legislature attempted to address issues of student loan debt and ultimately passed legislation that included licensing of a "student loan servicer," which means an entity (1) receiving any scheduled periodic payments from a student loan borrower or cosigner pursuant to the terms of a student loan; (2) applying the payments of principal and interest and such other payments with respect to the amounts received from a student loan borrower or cosigner, as may be required pursuant to the terms of a student loan; and (3) performing other administrative services with respect to a student loan, 110 ILCS 992/1-5.
In December 2018, the Illinois Department of Financial and Professional Regulation began accepting license applications with publication of an IDFPR Notice pursuant to Public Act 100-540 following submission of proposed regulations in November 2018, see 42 Ill Reg 20189. In May 2019, the Department issued license requirement letters to some schools that had not obtained loan service provider licenses; however, after further review of the regulations and scope of authority provided by the 2017 law, the Department withdrew its regulation in November 2019...
Statutory Definitions and Legislative Intent
Excerpts from Legislative Transcripts:
- “…this regulates the conversations between the borrowers and the services." (Senator Biss, 5/10/17, page 78)
- "And just to be clear, your -- your bill addresses the -- the servicers, not -- not the lenders...Yes" (Senators Nybo and Biss, 5/10/17, page 79)
- "Those repayment terms and obligations you were just talking about, those are all set by the Department of Education, the federal Department of Education. They’re not set by the servicers themselves....Yeah" (Senators Nybo and Biss, 5/10/17, pages 80-81)
- "This bill is about the problem which arises when the borrower is trying to figure out what to do. What are the options? What’s the best option for them? Who are they supposed to call? The servicer. Who’s supposed to walk them through their options? The servicer. Who’s responsible for directing them to the best option among those that, as you say, are set forth either in federal law or by the lender? The servicer." (Senator Biss, 5/10/17, page 81)
- “This Bill requires that all servicers have to provide students the full range of options." (Rep. Guzzardi, 5/31/17, page 146)
- "The federal government issues a loan to the student and then contracts with the servicers to provide the… to service the loan.” (Rep. Guzzardi, 5/31/17, page 148)
- "And there are only 14 companies that service federal student loans. And they are all going to be required to meet the standards of this Bill." (Rep. Guzzardi, 11/07/17, page 77)
