Carney, Fincher Introduce Student Loan Rehabilitation Bill

Press Release

U.S. Congressmen John Carney (D-DE) and Stephen Fincher (R-TN) today introduced a bipartisan bill 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. Senators Gary Peters (D-MI) and Shelley Moore Capito (R-WV) introduced a companion bill in the Senate earlier this week.

"With the cost of college skyrocketing, more and more students are relying on student loans to afford an education," said Congressman Carney. "Our bill makes sure that students who take responsibility for their loans are able to get back on track and keep their credit clean. As our economy recovers, we need legislation like the FAIR Act so recent graduates have the chance to buy a home, start a family, and pursue the American dream without the shadow of bad credit getting in the way."

"This important legislation ensures that young people who have worked hard to obtain a college degree will have the opportunity to maintain good credit scores and have a fair start as contributors to our society and workforce," said Congressman Fincher. "In this economy, many students have experienced difficulty obtaining a good-paying job upon graduation. Our bill would allow private student loan borrowers to utilize programs already available to borrowers of federal loans to repair their credit scores should a default occur. Graduates entering the labor force should be given every opportunity to succeed -- our legislation would promote that path to success and financial stability."

"For young people just getting started in today's world, bad credit can permanently damage their economic future," said Senator Peters. "The vast majority of student loans are public and already eligible for loan rehabilitation, and it's unfair to deny graduates with private loans the same ability to get back on track after a default. I am proud to introduce this commonsense, bipartisan bill that will help borrowers in default fix their mistakes and get back on their feet financially while increasing the likelihood of repayment for lenders."

"The FAIR Student Credit Act aims to make it easier for students with private loans to recover from a defaulted loan quickly and without permanently harming their financial future," said Senator Capito. "This bill provides students with private loans the same opportunity to for rehabilitation that is already available to graduates with federal loans. I am proud to join with Senator Peters to support this important legislation."

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.

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.