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State drops 22% fee on student debt collection: What does that mean?

  • / Updated:
  • Josh Durso 

Additional fees will be banned from outstanding educational debt in New York State.

It’s part of legislation signed into law by Governor Kathy Hochul, which ends the practice of charging an additional fee to debtors when collecting outstanding debts owed to the state.

Prior to this law, a fee of 22 percent was added by state law on top of the total debt due.

“When students across New York spoke up about the difficulties of digging out of debt, my administration listened,” Governor Hochul said. “By signing this legislation, we are removing a barrier to higher education and ensuring that students can graduate without debilitating debt that has disproportionately hurt students least able to afford it. Every New Yorker deserves access to a quality education without fear of getting trapped in a cycle of debt.”

Legislation (S.7862B/A.10261) adds a provision to the state finance law prohibiting state agencies from collecting a 22 percent fee when enforcing debt collection on educational debt. Various state agencies collect educational debts owed to the State, and when unable to collect through traditional means, these debts may be referred to the Office of the Attorney General’s Civil Recoveries Bureau. Prior to the signing of this legislation, state law provided that the Attorney General recover its costs in pursuing collection of this educational debt through an additional fee of up to 22 percent of the outstanding debt; That fee was then added on top of the total debt due, which substantially increased the amount owed by student debtors.

“Charging fees to students already struggling with debt only compounds the problem. This law addresses that inequity and is an important step in helping these New Yorkers become financially stable. I was proud to push for this legislation and commend the bill sponsors and Governor Hochul for taking this action,” Attorney General Letitia James said.