In The News: Peters Introduces FAIR Student Credit Act
Last week, Senator Peters introduced the Federal Adjustment in Reporting (FAIR) Student Credit Act, a bipartisan bill to help private student loan borrowers rehabilitate defaulted loans. The legislation would enable a borrower who has successfully completed a series of on-time payments to remove the student loan default from their credit report.
“Pew Research shows 69 percent of college grads in 2012 had taken out student loans to pay for school. The typical amount borrowed was more than double that of a college grad 20 years ago.
U.S. Sen. Gary Peters (D-MI) will introduce a bill Tuesday in Washington, aimed at helping new college grads, who he says are most vulnerable to defaulting on their loans because they're faced with debt immediately but they may not have a job lined up.”
“A bipartisan proposal expected to be introduced in Congress Tuesday would erase private student loan defaults from credit reports after college graduates make nine consecutive payments.
U.S. Sen. Gary Peters, D-Bloomfield Township, announced the legislation Monday at the Michigan State University Union.
Peters said the bill, which he will introduce Tuesday, would help graduates stay current on private loans while starting their careers and families. He said payment plans are already in place for federal loans.
He said his bill, while not a cure-all, would allow graduates who have defaulted on private loans to work with banks to create payment plans. Banks would not be required to participate.
"One thing about a student loan is you can never discharge it. The student loan is going to be with you for your entire life," Peters said at Monday's press conference. "What my legislation does is to ensure that those students who may have defaulted get a second chance."”
“Students from around the state of Michigan flanked Peters during the announcement at MSU. One of the students, Stephanie Ly, said she hopes the bill becomes law because she's concerned she'll one day be thrust into a situation where it may be tough to make payments.
A recent graduate of Michigan State University, Ly now works as an international student advisor at the university. Her job allows her to make the minimum payments on her student loans, but she worries that if she unexpectedly loses her job or falls ill, her financial situation will be such that she defaults on her private loans.
If that happens, Ly said, she needs the same chance to rehabilitate her credit.
“I should have the same opportunity as other federal loan borrowers to rehabilitate my loan, make affordable payments and remove a default from my credit report,” she said.”
“Under current law, federal student loans may be rehabilitated once, and borrowers may repair their credit after the default. Private lenders do not have the same ability.
“It is simply unfair to deny some graduates the ability to get their finances back on track after a default simply because their loans are private instead of public,” said Peters of Bloomfield Township.
He noted that most borrowers who struggle are recent graduates who either don’t get a job soon after graduation or who don’t make enough to make loan payments on top of their other bills.
“It’s really meant to be a second chance, but it also addresses the reality of a student loan — which is that most people who default on their student loans do it early in their career before their career’s even started,” said Peters, noting the bill has the support of Navient, the nation’s largest servicer of student loans.
Peters and Capito previously introduced the Federal Adjustment in Reporting Student Credit Act in 2013 when both were members of the House.”
“The legislation would allow a student loan borrower a chance to remove a default from his or her credit report by successfully completing a schedule of on-time payments. Such a program already exists for students with federal loans but not for private lenders.
Peters' office said that while the vast majority of higher education loans are public ones, there are currently more than 850,000 private student loans in default. A poor credit report can affect a borrower's chances of financing property or an automobile or renting an apartment.”
“Peters said defaults typically occur when students graduate and payments on their loans begin. But some don’t immediately find work, or find jobs that pay enough to cover their debts.
Once they get jobs and start paying on those loans, a default on their credit records often hampers them from car loans or apartment rentals.
“In Michigan, they use credit scores for insurance,” Peters said. “The bill is very straightforward. It says if you go to your bank or credit union and have a payment plan and you make payments for nine months, it’s taken off your credit report as if it never happened. It basically gives the recent graduate a second chance. We already do this for federal student loans.”
In Michigan alone, the White House estimates there are 1,516,000 student borrowers who owe more than $40 billion in student loans.
Loans from private lenders make up about 15 percent of all student loans, Peters said, but that percentage is growing because students often need more than federally-issued loans provide to make it through college.”
“Peters has proposed legislation that would allow students to make nine months of payments to fix their credit score. The Senator told WMUK's Gordon Evans that it's an option already available for students with federal loans. Peters says most defaults on student loans come soon after college when students are looking for work or in a job that doesn't pay well. But he says it stays on their credit report forever.”
“The bipartisan bill is called the ‘FAIR Student Credit Act.’ It would allow people with private loans that are currently in default to negotiate a payment schedule with their bank or credit union to re–pay what they owe.”
“U.S. Sen. Gary Peters says he will introduce a new bill to give those who default on private student loans and then start paying again a chance to clean up their credit.
Peters, a Democrat from Bloomfield Township, says student loan debt is growing — and so is the number of people defaulting on their loans. He said his bill is aimed at younger borrowers who may be struggling to find a job and make payments.”
“Senator Gary Peters, from Michigan, is introducing bipartisan legislation aimed at helping people with defaulted student loans.”
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