Amid the Growing Student Loan Default Crisis, the State Budget Deal Fails to Provide Programmatic Help to California's Four Million Student Loan Borrowers

 

Sacramento, CA — The California Legislature reached a budget deal last week without funding the Student Loan Empowerment (SLE) Network, leaving the state's only dedicated student loan borrower support program on the brink of collapse — and nearly four million Californians without anywhere to turn.

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The SLE Network was created in the 2022-23 state budget and is administered by the Department of Financial Protection and Innovation (DFPI) – the first student loan borrower protection program in the country funded by state dollars. The program connects student loan borrowers with a network of 14 community organizations and legal aid groups that provide free, one-on-one counseling and legal help. The program results speak for themselves. In roughly two years of operation, it has already secured $4.6 million in debt cancellation and discharges for borrowers, $189,000 in refunds, and an average of $14,375 in monthly payment savings for borrowers who qualified for more affordable repayment plans.

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Without additional funding, the program will be forced to wind down at the worst possible moment as, starting in early July, sweeping changes to the federal student loan system under the One Big Beautiful Bill Act will begin to take effect. These changes will strip away the most affordable repayment options for the lowest-income borrowers. Concurrently, the Department of Education is being dismantled and its representatives have made very clear that it has little interest in protecting borrowers. Right now, more than 795,000 Californians are in loan default status and the state's four million student borrowers collectively owe $171 billion. Without the SLE network, these borrowers have nowhere to go for free, trusted guidance on what to do.

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The Campaign for California Borrowers' Rights responded to the budget agreement news with the following statement:

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"California has always been a place that stands up for its people when the federal government won't. We're urging Governor Newsom and the Legislature to do that again — by including $7.25 million in one-time funding for the Student Loan Empowerment Network in the final budget. 

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There's no sugarcoating it: losing this program right now would be a serious blow to hundreds of thousands of borrowers who are already struggling. The Trump Administration is gutting the federal student loan safety net. Servicers aren't helping. And families trying to get their loans back on track need someone in their corner. That's what the SLE Network does — and it works. 

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We know the state is facing hard choices this budget year. But this is exactly the kind of targeted, proven investment that delivers not in theory, but in real dollars back in people's pockets.”

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About the Campaign for California Borrowers’ Rights 

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The Campaign for California Borrowers’ Rights is a diverse coalition of organizations representing students, workers, consumers, older individuals, communities of color, veterans, and millions of other Californians affected by the student debt crisis. The Campaign is led by NextGen California, Protect Borrowers, Student Debt Crisis Center, and Young Invincibles. 

 

More information about the Campaign is available at https://www.californiaborrowers.org/.