Senator Dick Durbin proposes acts to reduce student loan debt
As student loan debt reaches $1 trillion and University students graduate with almost $23,000 on average, Sen. Dick Durbin, D-Ill., reintroduced two new pieces of legislation last month that address the situation.
“Too many Americans are carrying around mortgage-sized student loan debt that forces them to put off major life decisions like buying a home or starting a family,” Durbin said in a press release. “It’s not only young people facing this crisis; it is parents, siblings and even grandparents who co-signed private loans long ago and are still making payments decades later.”
According to the nonprofit College In Sight, average student debt in Illinois was $26,470 for 2011 graduates, the 15th highest in the nation.
Under the first piece of legislation, the Know Before You Owe Act, colleges would be required to discuss the difference between private and governmental loans with student borrowers before they sign.
Schools would be responsible for confirming the student borrower’s enrollment status, cost of tuition and estimated federal aid before any loan is approved.
The act also mandates that private lenders provide borrowers with quarterly reports about their balance and interest accrued.
Charles Mayfield, associate director of student financial aid, said this bill could be beneficial because it puts schools in the middle of the loan search process, but it may encourage students to borrow more money than they need.
Whereas Know Before You Owe is a preventative piece of legislation, the second act is more reactionary.
The Fairness for Struggling Students Act proposes treating private loans equivalent to other types of private debt by allowing graduates to declare bankruptcy,a process which was in effect until 2005 when Congress changed the law.
Andrew Flach, spokesman for Rep. Rodney Davis, R-13, said student debt is a priority for Davis.
“We must also look at ways to control the skyrocketing increases in tuition costs and to make sure that students can actually find jobs upon graduation so they can pay back their loans,” Flach said.
However, Davis believes there are flaws with this act.
“Unfortunately, one of the unintended consequences with the bill, as introduced, is that it may make it even more difficult for students to obtain education loans because allowing students to declare bankruptcy will automatically make them a higher risk candidate,” Flach said.
Mayfield said the University encourages students to take federal loans instead of private loans.
“We feel like the benefits that go with the federal loans are better in most cases — almost all cases — than the benefits that go with a private loan,”
Robert Lawless, professor of law, said the act may benefit students across the country but would not impact the University because the loans it provides are not considered private as they are distributed using institutional funds. The University gave out $1,777,133 to 1,049 students in long-term loans in fiscal year 2012.
Whether or not the acts pass, Mayfield and Flach said students have the responsibility to educate themselves on loans before borrowing.
“Obtaining a student loan shouldn’t be as easy as simply signing a piece of paper,” Flach said. “There should be counseling to allow the student and his or her family to weigh their options before making a decision.”
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