Student Loan Debt: Expansion of Borrowers’ Rights?
Kellen Wittkop[*]
College students navigate a constant balancing act of managing the many stresses that accompany enrollment at any institution of higher learning: classes, activities, job searches, etc. But one of the largest causes of anxiety for students is something that often looms largely in the shadows – debt. According to American Student Assistance, a non-profit organization that promotes itself as a “nonprofit you can rely on for neutral, honest student loan solutions,” of the approximate 20 million students in attendance each year, 60% (12 million) of those students borrow annually to cover costs of their education.[2] Estimates from the Federal Reserve Bank of New York and the Consumer Finance Protection Bureau (CFPB) put outstanding student loan debt in the range of $902 billion to $1 trillion.
Some members of Congress have recognized this problem and have taken action. In late December 2013, a group of Democratic senators—led in large part by former Harvard Law professor Elizabeth Warren—announced a package of bills aimed largely at giving student loan borrowers greater rights, now officially titled the “Student Loan Borrower Bill of Rights.”[3] Essentially, the bill seeks to amend the Truth in Lending Act to provide greater disclosure information to borrowers and direction for the order of payment applications by servicers, among other goals.
Some of the issues covered in the bill include: new regulations for servicing private loans (about 14% of all student loans) involving advising the borrower of their long-term options; a “Bill of Rights” section aimed at directing servicers to apply any extra money to outstanding loan principle with the highest interest rate, helping to ensure that borrowers pay down their more expensive loans first; a similar section for the “rights” of borrowers of federal student loans including an instruction to the CFPB to draft rules promoting cost-minimization for borrowers; and other sections involving specific provisions for members of the military and enrollment verifications for servicers.[4] The bill has been referred to the Committee on Health, Education, Labor, and Pensions.
For now, those of us with the specter of debt imminent to our futures, we can only hope that this bill and others like it will change the culture of student loan borrowing. As Senator Jack Reed stated, “If we’re going to make a dent in making college affordable, we have to hold servicers accountable, increase transparency, and ensure students and their families get a fair deal.”[5]
[*] J.D. Candidate, Harvard Law School, 2016.
[2] Steven Hansen, Are Student Loans Destroying Consumption?, Seeking Alpha (Dec. 30, 2012, 3:09 AM), https://seekingalpha.com/article/1086811-are-student-loans-destroying-consumption [https://perma.cc/7YJP-XHBE].
[3] S. 1803, 113th Cong. (2013).
[4] Karen Weise, Unpacking the Proposed Student Loan Borrower Bill of Rights, Bloomberg Businessweek (Dec. 13, 2013), https://www.bloomberg.com/news/articles/2013-12-13/unpacking-the-proposed-student-loan-borrower-bill-of-rights [https://perma.cc/VK75-NWUN].
[5] Press Release, Office of Sen. Dick Durbin, Durbin, Warren, Boxer, Reed Introduce Student Loan Borrower Bill of Rights (Dec. 11, 2013), https://www.durbin.senate.gov/newsroom/press-releases/durbin-warren-boxer-reed-introduce-student-loan-borrower-bill-of-rights [https://perma.cc/GW8C-RNDP].
What ever happened to bursaries? When I was studying, a long time ago now, companies used to offer students bursaries. In consideration for paying their university fees, students would commit to working for the company after graduation for an agreed period of time; typically 3 to 5 years.
The benefit of this approach was that students were guaranteed a job after they graduated and they had no debt.
I hope you don’t mind a comment from Sydney Australia?
Having lived in your great country for a number of years I still follow your current affairs with interest.
It’s a perplexing situation to see young people start out in life saddled with sizeable debt and in most instances no real money management skills.
As you’re pointing out this can be further exacerbated when they commit to loans they don’t fully understand the ramifications of.
Hopefully the current initiatives find the light of day and provide a firmer financial footing for those that probably need it the most.
Student loan debt will be the major issue of the 21st century. These loans are going to delay the ability of new graduates to move forward with their lives. The payments will hold them back from buying houses & cars. This will have an effect on the future economy.
Yeah this is the major problem. When i was in UK and wanted to get the education loan for my studies but the bank had not given me the opportunity. So Student loan debt will be a major problem and a remarkable question in forthcoming years.
I am totally agree with vishal. This is the biggest issue for all types of students.
I think there are so many ways to come out of debt, but the biggest problems is the believe that you can get out of it and start something that you can believe and achieve. Also there are to many excuses for not making the best out of your life. I do not think we need loans, I think we need practise how to make money in a proper way.
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Such a great post, really helpful! Thanks!
Very interesting! I wonder how Elizabeth Warren would help borrowers should she run for president?
Howdy! This blog post couldn’t be written any better! Looking at this article reminds me of my previous roommate! He continually kept preaching about this. I am going to forward this article to him. Pretty sure he’ll have a very good read. Thanks for sharing!
the biggest problems is the believe that you can get out of it and start something that you can believe and achieve. Also there are to many excuses for not making the best out of your life
Hi Kellen,
It’s the same here in the UK – students can accrue tuition fees at up to £9k per annum, and that obviously doesn’t cover the cost of supporting themselves. I suppose it’s not untypical for the average student to leave college with a £40k debt hanging round their necks.
I am so glad we have the TOPS progam in my state (Louisiana). Makes getting through college debt free a real possibiltiy!