November 15, 2015

National student loan debt in the U.S. has now surpassed the amount of credit card balances, car loans, and home equity debt totaling $1.3 trillion—a culmination of the 23 million student borrowers. The growing amount of student debt is causing increased concern and a push for Legislation for Student Debt Relief.

There are many factors that can be attributed to the hardship created by student loans, however, most seem to stem directly from the lenders. The Consumer Financial Protection Bureau came out with a report calling attention to the prevalent servicing failures reported by consumers. Failures that have been reported range from lack of communication to lenders misplacing paperwork to misapplying payments.

Particularly, Florida seems to have an unprecedented amount of unpaid college loans.  According to a WalletHub.com analysis, delinquent loans and loans in default are nearly double the national rate. While the national rate currently stands at 11.1 percent, Florida’s national rate weighs in at 21.5 percent! U.S. congressman, Ted Deutch, who represents South Florida, is proposing legislation that would help college graduates of all ages.

His astute analysis of the current state of student loans has led him to propose some highly efficient legislation. Deutch himself claims to have made student loan payments into his 30s and is aware that many people carry student debt with them way past that. One example of how long student debt can go on are the senior citizens whose Social Security is garnished because they were unable to keep up with their payments.

Common problems consist of various interactions with lenders. Firstly, problems are created through the unfair payments required by lender. The required payments are not enough to reduce the principal balance and just barely cover the interest. As mentioned earlier, some lenders will misapply the payments and this is another way the balance does not get paid down. Furthermore, there is a lack of transparency that hurts student borrower’s who aren’t notified when a new company takes over their debt and will find themselves missing payments because it was sent to their former lender. Lastly, the garnishment of Social Security checks can cause seniors to fall into poverty.

Deutch has proposed three new pieces of legislation to help combat these common problems. The Student Loan Payment Optimization Act would require lenders to fairly apply payments to reduce the principal balance and make sure loans are being handled consistently. Next, the Student Loan Transfers Disclosure Act would require lenders to notify student borrowers when a new company takes over their debt to avoid misinformation and difficulty for the debtors. Lastly, the Social Security Garnishment Modernization Act is designed to help seniors increase the amount of their Social Security check that lenders will not be able to garnish.

While it is clear that Floridian student borrowers are suffering as a result of student loan debt, perhaps some important legislation will arise from this unfortunate situation. If Deutch’s proposed legislation can help alleviate some of the hardship and reduce the rate of loans that are delinquent or in default then it is likely student borrowers across the country could benefit from adopting this legislation. According to Deutch, he has bipartisan support for his legislation and it’s not hard to understand why.

 
Legislation for Student Debt Relief

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