Libby Nelson from Politico reports that Senate Democrats are proposing some major changes to student loans – among them include “forcing colleges to pay the Education Department if they have high default rates and allowing student debt to be wiped out in bankruptcy” and “calling to revive a dormant grant program for poor students that could give the federal government more influence over state higher education policy.”
Apparently, Democrats have been unhappy and dissatisfied with the interest rate hikes from July, and have been working tirelessly to make sure that students and families are high on the agenda for 2014.
“Senate Democrats will ‘focus on the economic burdens facing American families,’ said Sen. Dick Durbin (D-Ill.), who is leading the push with Sens. Elizabeth Warren (D-Mass.) and Jack Reed (D-R.I.). “This issue about student debt, and the debt of families of students is front and center.”
The senators’ higher education agenda stretches from the moment a student decides to take out a loan into the decades-long repayment process.
Among the proposals: A “borrower’s bill of rights” to beef up requirements on loan servicers. The revival of an old program that gave out federal grants to states, which passed the money along to low-income students. The return of the ability to discharge student loans in bankruptcy. And a requirement that colleges with a loan default rate of above 15 percent pay a percentage of the amount students borrow to the Education Department.
More legislation is likely to follow once the Government Accountability Office releases a highly anticipated report on the cost of the federal student loan program at the end of January.
“We’re all working on the reauthorization of the Higher Education Act and … the three of us are determined that we’re going to tackle the rising cost of college head-on,” Warren said on a call with reporters Thursday morning.
Earlier this month,
Durbin released a “Bill of Rights” with six “basic rights” for students with federal and private student loan borrowers:
1. The right to have options such as alternative payment plans to avoid default.
2. The right to be informed about key terms and conditions of the loan and any repayment options to ensure changing plans won’t cost more.
3. The right to know your loan’s servicer and who to reach out to when there is a problem.
4. The right to consistency when it comes to how monthly payments are applied. Lenders and servicers should also honor promotions and promises that are advertised or offered.
5. The right to fairness, like grace periods when loans are transferred or debt cancellation when the borrower dies or becomes disabled.
6. The right to accountability, including timely resolution of errors and certification of private loans.
Ahead of its release, Durbin said “Borrowers are already struggling to make ends meet as they graduate with debt that surpasses their annual wages. These borrowers and their families should not have to face additional costs because they cannot resolve errors quickly or gain access to programs meant to help them. My bill will ensure that all borrowers will have access to these basic rights and protections.”
Cross-Posted at I AM NOT A LOAN.