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MANAGING EDITOR

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Edited and managed by students at

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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.