U.S. Senators Shelley Moore Capito (R-W.Va.) and Gary Peters (D-Mich.) 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 (D-Del.) plans to introduce a companion bill in the House of Representatives in the coming days.
“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.”
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.
