THE ISSUE: The Student Borrowers Bill of Rights Act of 2013 was recently introduced to the U.S. House of Representatives. One of the most noteworthy stipulations in this bill is the allowance for student loans to be forgiven once a person declares bankruptcy.
As tuition bills increase, so does the demand for student loans — but sadly these loans lack necessary consumer protections. The aforementioned bill would help install much needed protections for student borrowers.
The tremendous need for borrowing has placed too much leverage in the hands of lenders at the expense of student borrowers.
The Student Loan Borrowers’ Bill of Rights, is a step in the right direction. It would help level the playing field between student borrowers and lenders as it would effectively add consumer protections and free student borrowers of some of the inherent hardships that currently accompany student loan debt.
Lenders have far too much power given that dischargement is not an option for students who have declared bankruptcy. While bankruptcy is never attractive, it is an option that borrowers outside of the student loan sector have a right to and student consumers deserve this same level of protection.
Currently, students that borrow from private lenders must adhere to whatever time table the lender sets for repayment. This includes the absence of deferment or income based payment options. By introducing the option for defaulting, lenders could be encouraged to offer more reasonable timetables or repayment options. It would be better for them to be repaid on a different timetable than for the borrower to default.
The bottom line is that added consumer protections would keep lenders honest and force them to be more careful about whom they lend to. While, yes, everyone qualified to seek higher education should be able to do so, writing blank checks that are doomed from the start is not the answer. The current system is fiscally irresponsible and does little more than strain the economy.
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