Sen. Gary Peters
LANSING, Mich.—Two members of Congress are introducing legislation that would allow lenders to restore a student loan borrower’s good credit following a series of on-time payments over nine months.
The legislation, being introduced by Sen. Gary Peters (D-MI) and Sen. Shelly Moore-Capito (R-WV) seeks to address an inconsistency in student lending laws. Under current law, federal student loans may be rehabilitated once, and borrowers may repair their credit after the default. Private lenders do not have the same ability.
“It is simply unfair to deny some graduates the ability to get their finances back on track after a default simply because their loans are private instead of public,” said Peters during an event at Michigan State University.
Peters said it is the most recent graduates with student debt are being most affected, as they don’t earn enough money to make both loan payments and also pay their other bills.
“It’s really meant to be a second chance, but it also addresses the reality of a student loan — which is that most people who default on their student loans do it early in their career before their career’s even started,” said Peters during the event.
Peters had previously co-sponsored a separate bill that would allow borrowers with outstanding student-loan debt to refinance at the lower interest rates approved last year for new borrowers. U.S. Rep. Debbie Dingell (D-MI) has sponsored a similar measure in the House.
The legislation has the support of the Michigan CU League.