Unsigned editorials reflect the official position of the Daily’s editorial board. All other signed articles and illustrations represent solely the views of their authors. LAURA SCHINAGLE EDITOR IN CHIEF MELISSA SCHOLKE EDITORIAL PAGE EDITOR DEREK WOLFE MANAGING EDITOR 420 Maynard St. Ann Arbor, MI 48109 tothedaily@umich.edu Edited and managed by students at the University of Michigan since 1890. 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.