BILL NUMBER: S5598A
SPONSOR: MAY
 
TITLE OF BILL:
An act to amend the general business law and the civil practice law and
rules, in relation to protecting private education loan borrowers and
cosigners
 
PURPOSE OR GENERAL IDEA OF BILL:
To protect private education loan borrowers and cosigners from predatory
lending practices, unfair debt collection, and barriers to cosigner
release.
 
SUMMARY OF PROVISIONS:
This bill creates a new article in the general business law establishing
protections for private education loan borrowers and cosigners.
The bill requires lenders to provide clear information about cosigner
release, respond to release applications within thirty days, and cap
payment requirements at twelve consecutive on-time payments. Lenders
must automatically release cosigners who become totally and permanently
disabled.
The bill prohibits loan acceleration except for nonpayment and bans
changes to loan terms when a cosigner dies or files for bankruptcy.
The bill requires debt collectors to possess and provide detailed loan
documentation before attempting collection, including proof of ownership
and transaction history.
The bill creates enforcement mechanisms through private lawsuits and
Attorney General actions. Borrowers can recover damages and obtain
injunctive relief. The Superintendent of Financial Services gains
authority to promulgate regulations and impose penalties.
The bill also clarifies the definition of "original creditor" in debt
collection proceedings involving private education loans.
 
JUSTIFICATION:
Private education loan borrowers face mounting challenges as changes to
federal student loan programs push more students into the private lend-
ing market. Recent federal policy shifts limiting graduate student loan
access mean more borrowers will rely on private loans with high interest
rates, rigid repayment terms, and fewer consumer protections.
Unlike federal loans, private education loans typically offer no
income-driven repayment, no public service forgiveness, and limited
forbearance options. When borrowers encounter financial hardship, they
face aggressive collection practices without the protections available
for other consumer debts. Cosigners bear particular risk. Many sign
onto loans to help students attend college but find themselves trapped
in obligations they cannot escape even after years of on-time payments.
Widespread abuses are occurring in the private loan market. Courts have
found that major servicers systematically block cosigner release despite
advertising it to encourage cosigning, count payments incorrectly to
disqualify borrowers from release, and offer forbearances without
disclosing that accepting will restart the cosigner release clock. Debt
collectors pursue loans without basic documentation, submit false affi-
davits to courts, and file lawsuits disproportionately in majority-mi-
nority communities.
More than two million New Yorkers carry student debt. As federal
programs contract, private lenders will capture a larger share of the
market. Without state intervention, predatory practices will intensify.
Borrowers need protections now.
This legislation addresses the core problems in the private loan market.
It creates transparency requirements so borrowers and cosigners under-
stand their rights. It establishes clear timelines and standards for
cosigner release. It prohibits abusive acceleration and term changes. It
requires debt collectors to possess proper documentation before filing
suit. It provides enforcement tools to hold bad actors accountable.
The need for these protections will only grow as more students turn to
private loans to finance their education.
 
PRIOR LEGISLATIVE HISTORY:
2025-26: S.5598 (May) / A.4922 (Levenberg)
2023-24: S.362 (Thomas) / A.3155 (Zebrowski)
2021-22: S.5136-B (Thomas) / A.6226-B (Zebrowski)
 
FISCAL IMPLICATIONS:
Minimal.
 
EFFECTIVE DATE:
This act shall take effect on the one hundred eightieth day after it
shall have become a law.

Statutes affected:
S5598: 105 civil practice law
S5598A: 105 civil practice law