Today, millions of Americans are dealing with massive student loan bills that will take them years or even decades to pay off, and now some federal lawmakers want to help particularly struggling borrowers get out from under some of these balances.
A number of U.S. Senators recently introduced two bills to Congress that are designed to help those struggling with massive education financing debts, according to a report from the office of U.S. Sen. Richard Durbin, a Democrat from Illinois. The first such bill, known as the Fairness of Struggling Students Act of 2013, is designed to allow borrowers to have their private loan burdens discharged in bankruptcy as they would any other debt. The other, called the Know Before You Owe Act of 2013, will require colleges and universities to fully explain debt obligations to potential borrowers before allowing them to sign off on such an agreement.
“The first two pieces of legislation I will introduce this Congress deal with what I think is one of the biggest threats to millions of working families – the growing student loan debt crisis,” Durbin said. “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. 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.”
It should be noted, though, that these relate largely to private student loans, which can be very different from those issued by the federal government, the report said. For one thing, federal loans carried fixed interest rates and come with numerous consumer protections that private lenders are not required to offer, and as such, these can often be difficult to pay back both because of rules related to when borrowers have to begin making contributions and because of the interest rates they carry, which currently amount to as much as 18 percent.
The average college student is now graduating not only with tens of thousands of dollars in education loans in their name, but also thousands more in credit card and even auto loan debt in their name, all of which can make it more difficult for them to gain financial independence soon after leaving school.