February 17, 2014
Finally, a Law That Would Protect People From Student Loan Hell
The proposed Student Loan Borrower Bill of Rights Act would restore bankruptcy protections and other consumer safeguards for federal and private student loans.
Many well-intentioned graduates can't afford to pay off their student loans because of the sour economy. They are being sacked with debt and penalties that outweigh their best efforts to keep up.
Unlike other forms of debt, in the case of student loans, basic consumer rights like bankruptcy protection don't apply to those who default. Instead, everyone from recent college graduates to the older underemployed who can't afford to pay is subject to garnished wages and other income in the name of paying for higher education with an increasingly high price tag. Unresolved student loan debt in the United States now surpasses $1 trillion.
That’s where the bill proposed by Rep. Frederica Wilson, D-Fla., the Student Borrowers Bill of Rights Act, H.R. 3892, comes in as a possible solution.
The bill includes restoring bankruptcy protections for federal and private student loans and limits collections efforts to six years—instead of allowing an endless chase. It also would prohibit the financially and emotionally crippling garnishment of wages, Social Security benefits, and tax refunds from being used to collect debt owed.
“The soaring cost of college is not only hurting students and their families; it is hurting consumer demand and, in turn, hurting our economic recovery,” Wilson told TakePart. “I’m introducing student loan reform now because I think it can improve lives, boost Americans’ purchasing power, and help promote job creation.”
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That also means evidence of a borrower’s default on a federal school loan would not be allowed in state or federal proceedings in deciding the status of a professional license, according to the bill.
Also, colleges and universities participating in Title IV programs, which include the Federal Family Education Loan and Federal Work-Study, would not be able to withhold a borrower’s transcripts, degrees, or other certifications because of federal student loan default.
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