Lansing State Journal: Guarantee students a second chance after loan default
Thousands of college students across Michigan recently celebrated a pivotal, hard-earned milestone: graduation. These young people are now embarking on their next chapter in life. Whether that means graduate school, a new career or something still unplanned, the weight of student loan debt has the potential to undermine their promising future.
As a father of three, I know firsthand that higher education has become an increasingly essential part of getting ahead in today's economy. At the same time, the cost of higher education has continued to rise dramatically, creating an immense financial burden for students and their families. The Institute for College Access & Success estimates that 63% of Michigan students at four-year institutions have taken on debt.
It can be tough for young people to find that first job, let alone a job that allows them to pay all their bills while paying off student loans. You can never discharge a student loan, so for those who stumble and cannot make their payments, the unfortunate result is often a default that lingers on their credit report.
The vast majority of higher education loans are federal, and these borrowers have access to loan rehabilitation after default so they can improve their credit report after successfully managing their payments. Unfortunately, there is no opportunity to rehabilitate private loans, and private lenders can only request to delete information from a credit file if it was reported inaccurately.
That is why I have introduced the Federal Adjustment in Reporting (FAIR) Student Credit Act in the Senate to fix this disparity and level the playing field. This commonsense bill would enable a borrower with private loans who has completed a series of nine consecutive on-time payments to remove the student loan default from their credit report.
More and more students now depend on both federal and private student loans to pay for higher education. Across the country, there are more than 850,000 private student loans in default, adding up to about $8 billion. It is unfair to deny these borrowers the same ability to rehabilitate their loans after defaulting simply because they have private student loans.
For young people just getting started in today's world, bad credit can permanently damage their financial future. A bad credit report because of student loan default can make it harder to get a job, rent an apartment or buy a car for years. This has ripple effects that hurt our entire economy.
Helping borrowers get back on track after student loan default is an area where members of both parties can find common ground. I am proud to be working with Senator Shelley Moore Capito, a Republican from West Virginia, to advance this legislation in the Senate, and I'm pleased that a bipartisan companion bill has been introduced in the House of Representatives.
The FAIR Student Credit Act has already gained broad support from groups ranging from the U.S. Student Association and the Center for Responsible Lending to the Michigan Credit Union League and Navient, which services more than $300 billion in private student loans. Increasing the likelihood of loan repayments helps borrowers and lenders move forward.
There is a lot we need to do to rein in the skyrocketing cost of higher education, from expanding access to Pell grants to letting borrowers refinance student loans at lower rates. This bill will help tackle one significant piece of the puzzle.
This is simple: if you have a clean, consistent record of repayment on your student loan, you should be able to have that accurately reflected in your credit reports. Our state is counting on these borrowers to help us build a strong, vibrant economy. Students who take responsibility deserve a second chance and a path forward after default – no matter what type of student loan they have.
By: US Senator Gary Peters
Source: Lansing State Journal
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