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4

Thursday, May 14, 2015
The Michigan Daily — michigandaily.com
OPINION

FROM THE DAILY

Give us some credit

Fair Student Credit Act would help defaulting students
W

hile speaking at Michigan State University on Monday, 
Sen. Gary Peters (D–Mich.) presented the details of the 
proposed Fair Student Credit Act, a bipartisan collabora-

tion between Peters and Sen. Shelley Moore Capito (R–W.Va.). The pro-
posed legislation is an attempt to help students regain good financial 
standing and avoid the pitfalls of student loan default and was initially 
introduced to the House in 2013. Applying a similar credit rehabilita-
tion procedure to that of federal loans, the bill provides students with 
the beneficial opportunity to repair their credit after defaulting on pri-
vate student loans, as long as borrowers follow a schedule of nine con-
secutive payments. By doing so, the Fair Student Credit Act eliminates 
some discrepancies between public and private loans. The legislation 
intends to ensure students who needed to rely on these loans to finance 
their education will not face long-term credit damage because of con-
tinued financial difficulties after graduation and should be passed. 
However, the bill should be more comprehensive in order to be more 
beneficial to students.

For students coming from 

lower 
socioeconomic 
back-

grounds, the exorbitant costs 
that come with obtaining a 
college education often make 
taking out a private loan a 
necessity rather than an option. 
In the past 30 years, the average 
published price of in-state col-
lege tuition and fees for public 
universities has risen by 225 
percent adjusted for inflation, 
which could account for the 
prevalence of private student 
loans today. About one-fifth 
of debt from graduates of the 
class of 2012 was from private 
loans, and a good number of stu-
dents have had difficulty pay-
ing these loans. Approximately 
850,000 private student loans 

are in default — according to the 
Consumer Financial Bureau — 
constituting a sum of roughly 
$8 billion in debt. Even after 
obtaining a degree and incur-
ring debt, the current economic 
conditions may inhibit gradu-
ates’ ability to maintain, or even 
start, repaying the loans they 
accrued. Washtenaw County 
boasts some of the highest 
wages in the state, but overall, 
workers in Michigan earn less 
than the national average on 
their weekly paychecks. This 
could make it difficult for gradu-
ates working lower-income jobs 
while searching for a position in 
their desired field to pay back 
 

their loans. 

During his announcement, 

Peters stated, “It’s 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 pub-
lic.” Currently, discrepancies 
between federal and private 
loans may worsen the situ-
ation financially struggling 
graduates 
find 
themselves 

in if they do default. Private 
loans, unlike federal loans, 
don’t have fixed interest rates. 
These variable interest rates 
— ranging from roughly 3 to 
12 percent, depending on the 
lender — fluctuate throughout 
the period, which can increase 
the overall amount due at 
the end of students’ college 

O

n May 2, I sat in the bleach-
ers at the Big House as the 
blazing sun transformed my 

exposed 
arms, 

chest, 
face 
and 

scalp into a shade 
of 
bright 
pink. 

My eyes squinted 
against the solar 
glare, 
transfixed 

on the field for 
the Class of 2015’s 
commencement 
ceremony 
from 

the University of 
Michigan. Memo-
ries evoked emotions while speakers 
recalled some of the amazing accom-
plishments I had witnessed first-hand 
from the people I entered college with.

When I left my hometown — a vil-

lage of about 800 people — four years 
ago, I was sure I would be among that 
sea of caps and gowns, smiling with 
friends as we took the last step of our 
undergraduate career.

But I wasn’t.
I was among the anonymous crowd 

of family and friends, befuddled over 
how quickly four years had passed. 
We experienced the beginning of col-
lege together and are connected by 
the freedom we felt freshman year; 
we stumbled through dorms, tests and 
relationships, somehow starting to 
find ourselves. Yet, I often felt stunted 
in my journey, one step behind the 
people around me. I was blindly navi-
gating my way through college, unable 
to fully comprehend what I was there 
for and how I would be able to stay.

Most students enter the University 

with the belief that they will finish 

their undergraduate career in a mere 
four years. With a four-year gradua-
tion rate of about 76 percent, most stu-
dents do. However, halfway through 
my junior year, I realized the four-
year college experience wasn’t the 
path my life was destined to take (or 
able to given the circumstances).

When I first came to the University 

in the fall of 2011, my mom and dad, 
though separated, were technically 
married and made a combined salary 
around $100,000. Though they had a 
solid gross annual income on my first 
Free Application for Federal Student 
Aid, there was never any way for them 
to afford my college education.

My parents — saddled with debt 

and mental illness, which often con-
tributed to substance abuse — were 
financially unstable throughout most 
parts of my life. They were continu-
ously employed, but after the first few 
years of the new millennium, there 
was barely even enough money to 
cover the bills.

I was a pre-teen in a rural village 

worried about my family; I didn’t 
think about college or its costs seri-
ously. It’s also hard to plan for college 
when you’re the only one in the family 
to attend it. 

According to the FAFSA, my par-

ents were expected to pay thousands 
of dollars for my education. Luckily, I 
received a four-year scholarship that 
covered part of my tuition, with fed-
eral loans nearly covering the rest. 
Still, each of the eight semesters I’ve 
spent here, I’ve owed thousands of 
dollars to the University. Every time, 
we paid the money far past the begin-
ning of the semester deadline, most of 

More than just numbers

AARICA 
MARSH

careers. Private loans don’t regularly 
offer deferments or forbearance plans 
if students are experiencing issues 
finding employment or if their income 
is insufficient to maintain payments. 
Furthermore, private loan borrow-
ers are at even more of a disadvantage 
due to the shorter period in which an 
inability to pay can lead to default. 
Unlike federal loans, which go into 
default after 270 days of no payment, 
private loans are deemed in default 
after being unpaid for 120 days. 

These discrepancies between private 

and federal student loans, beyond cred-
it rehabilitation, need to be addressed. 
To make college more accessible, all 
types of student loans should work to 
help and accommodate students, not 
hurt them. The Fair Student Credit 
Act should be more encompassing 
in addressing these inconsistencies 
between private and federal loans. 
Even in terms of credit rehabilitation, 

the legislation doesn’t fully solve the 
issue. As it stands, the bill wouldn’t 
mandate that private banks comply, so 
there would be no guarantee that the 
default would be erased from a bor-
rower’s credit history. This could mean 
that, even if the bill passes, many banks 
will continue to damage students’ 
futures over financial difficulties that 
can be the inevitable result of higher 
education for many people. Addition-
ally, the private banks’ lack of account-
ability could create confusion for 
students regarding the consequences 
of defaulting on private student loans. 
In absence of requiring private banks 
to erase these defaults from the credit 
history of student borrowers who suc-
cessfully make the nine consecutive 
payments, private banks should at 
least have to be abundantly clear and 
up-front about whether or not they 
will comply with the Fair Student 
 

Credit Act.

