Peters, Capito Student Loan Rehabilitation Bill Advances in the Senate
WASHINGTON, D.C. – The U.S. Senate Banking, Housing, and Urban Affairs Committee today approved a provision based on bipartisan legislation introduced by U.S. Senators Gary Peters (D-MI) and Shelley Moore Capito (R-WV) to help private student loan borrowers rehabilitate their credit after a default on their loans. Currently, federal student loan borrowers are able to remove a default from their credit report, yet private student loan borrowers are not. The provision was approved as part of a larger package and now heads for consideration by the entire Senate.
“Students who invest in their education and career by taking out private student loans deserve the chance to recover from a default without permanently damaging their financial future,” said Senator Peters. “I am pleased this bipartisan, commonsense solution is moving forward in the U.S. Senate so that private student loan borrowers have the same opportunity as federal loan borrowers to repair their credit and secure their long-term financial success.”
“Students invest a lot in their education, and we need to do our part to help them maintain a secure financial footing as they pay off loans. Senator Peters and I have worked together on a solution to help make this possible. Like federal student loans, our bipartisan legislation will allow students with private loans opportunities to rehabilitate their credit following a default. I thank the Senate Banking Committee for advancing it out of the committee,” said Senator Capito.
This provision, based on the Federal Adjustment in Reporting (FAIR) Student Credit Act, would create an equal opportunity for private student loan borrowers who have successfully completed a series of on-time payments to remove a default from their credit report. Under current law, federal loans may be rehabilitated one time and borrowers can repair their credit by removing a default, but private lenders currently do not have the ability to remove negative credit information on borrowers who participate in loan rehabilitation programs. Instead, private lenders may only request to delete information from a credit report if it is inaccurate.
While 90 percent of higher education loans are public and therefore eligible for loan rehabilitation, private student loans currently total $9.9 billion, and more than 850,000 private student loans are in default, according to the Consumer Financial Protection Bureau. A bad credit report from a default can negatively impact a borrower’s ability to get a job, rent an apartment, buy a home, or purchase a car for years.
Peters and Capito previously introduced the FAIR Student Credit Act during the 114th Congress, and as members of the U.S. House of Representatives during the 113th Congress.
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