Peters Announces Bipartisan Student Loan Rehabilitation Bill at Michigan State University
Legislation Would Allow Private Student Loan Borrowers to Remove Default after Series of Payments
LANSING, MI – U.S. Senators Gary Peters (MI) announced today at Michigan State University that he will be introducing bipartisan legislation with Senator Shelley Moore Capito (WV) 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.
“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 Senator Peters. “For young people just getting started in today’s world, bad credit can permanently damage their economic future, and private student loan borrowers who have a consistent record of repayment should have that accurately reflected in their credit reports.”
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.
“Michigan State University is pleased to welcome Senator Peters as he announces legislation designed to enable students to achieve success even if they fall behind on their student loans,” said Mark Burnham, MSU Vice President of Governmental Affairs. “The bill that Senator Peters is announcing today seeks to enable students with private loans the opportunity to rehabilitate their credit.”
“As the cost of college has steadily increased, students across Michigan and the country depend on student loans to obtain a higher education. Every borrower should have an equal opportunity to get back on track in the event they default on their loans regardless of whether they have public or private student loans,” said Chris Gannon, President of the Student Association of Michigan. “Senator Peters continues to be a strong voice for Michigan’s students, and the Student Association of Michigan commends him for introducing this legislation to help ensure every student has the opportunity to succeed even after they’ve finished school.”
“Having customers with good credit is not only good for lenders, it’s good for Michigan’s economy,” said David Adams, President and CEO of the Michigan Credit Union League. “When we can lend to more customers with good credit, then more Michiganders are able to buy a home, get a new car, start a business or save for retirement. It’s great to see Senator Peters taking the lead on this important legislation to help people get back on strong financial footing after default for future borrowing and repayment.”
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