Peters, Capito Introduce Bipartisan Student Loan Rehabilitation Bill
Rep. Carney Plans to Introduce Companion Legislation in House of Representatives
Legislation Would Allow Private Student Loan Borrowers to Remove Default from Credit History after Series of Payments
WASHINGTON, DC – U.S. Senators Gary Peters (MI) and Shelley Moore Capito (WV) today introduced a bipartisan bill to help private student loan borrowers rehabilitate defaulted loans. The Federal Adjustment in Reporting (FAIR) Student Credit Act would enable a borrower who has successfully completed a series of on-time payments to remove the student loan default from their credit report. Unlike federal student loans, there is currently no opportunity to rehabilitate private student loans, and private lenders may only request to delete information from a credit file if it was reported inaccurately. U.S. Representative John Carney (DE) plans to introduce a companion bill in the House of Representatives in the coming days.
“For young people just getting started in today’s world, bad credit can permanently damage their economic future,” said Senator Peters. “The vast majority of student loans are public and already eligible for loan rehabilitation, and it’s unfair to deny graduates with private loans the same ability to get back on track after a default. I am proud to introduce this commonsense, bipartisan bill that will help borrowers in default fix their mistakes and get back on their feet financially while increasing the likelihood of repayment for lenders.”
“The FAIR Student Credit Act aims to make it easier for students with private loans to recover from a defaulted loan quickly and without permanently harming their financial future,” said Senator Capito. “This bill provides students with private loans the same opportunity to for rehabilitation that is already available to graduates with federal loans. I am proud to join with Senator Peters to support this important legislation.”
“With the cost of college skyrocketing, more and more students are relying on student loans to afford an education,” said Congressman Carney. “Our bill makes sure that students who take responsibility for their loans are able to get back on track and keep their credit clean. As our economy recovers, we need legislation like the FAIR Act so recent graduates have the chance to buy a home, start a family, and pursue the American dream without the shadow of bad credit getting in the way.”
The FAIR Student Credit Act would expand the loan rehabilitation program by giving private lenders the flexibility to make it easier for borrowers to meet their financial obligations. Under current law, federal loans may be rehabilitated one time and borrowers can repair their credit, while private lenders do not have the ability to remove negative credit information on borrowers who participate in loan rehabilitation programs. Peters and Capito previously introduced this bill together in the last Congress as members of the House.
There are currently more than 850,000 private student loans in default in the amount of $8 billion. A bad credit report can negatively impact a borrower’s attempts to gain employment, rent an apartment or purchase an automobile for years. This debt is harming our economic recovery, negatively impacting retirement savings, household spending and the demand for mortgage credit. Approximately 86 percent of higher education loans are public, which means those borrowers already have access to loan rehabilitation.
“The FAIR Student Credit Act is an important reform that gives student loan borrowers a second chance,” said Jack Remondi, President and CEO of Navient, which services more than $300 billion in student loans. “Navient applauds the sponsors for their bipartisan leadership to create a pathway to help private education loan borrowers get back on track to manage their payments successfully, improve their credit report, and enhance their financial outlook for the future.”
“The FAIR Student Credit Act offers private student loan borrowers who have a clean, consistent record of repayment the ability to have their strong payment record accurately reflected in their credit reports by removing the default notation,” said Maura Dundon, Senior Policy Counsel at the Center for Responsible Lending. “Federal student loan borrowers already enjoy this right, so private borrowers should as well.”
“With 13.7 percent of the millions of student debtors defaulting on their student loans, the last thing people struggling with student debt need are negative credit reports to further impede them from making a life for themselves,” said Maxwell John Love, President of the U.S. Student Association. “This is why we need innovative legislation like the FAIR Student Credit Act, and why we need bold champions like Senator Peters to stand up for students in Congress.”
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