On Wednesday, the Senate passed the Economic Growth, Regulatory Relief, and Consumer Protection Act by a vote of 67-31. The bill contains three provisions affecting student financial aid: two regarding private student loans and one outlining best practices for financial literacy in institutions of higher education.
The first provision prohibits private student loan lenders from declaring a student borrower in immediate default or accelerating the payments of the loan due to the death or bankruptcy-filing of the cosigner. This provision will also release private student loan cosigners of any obligation in the event the student borrower passes away. Although this provision releases the cosigner, it does not force private lenders to forgive the loan of the deceased borrower, meaning they can still seek to recoup the balance of the loan from the borrower’s estate. This provision would only apply to new private loan borrowers and would not be extended to students whose spouses cosigned their loans.
The second provision permits, but does not require, private lenders to establish rehabilitation programs for defaulted loans. Under this clause, a borrower will be able to request a financial institution remove a reported default from their credit report if the borrower makes an agreed upon amount of consecutive, on-time monthly payments that demonstrates to the lender an “ability and willingness to repay the loan.” A borrower would be allowed to rehabilitate a private loan only once.
The third provision related to financial aid introduced an outline of what will be included in a forthcoming publication on best practices for institutions on financial literacy. The best practices, established by the U.S. Securities and Exchange Commission after consulting with institutions and soliciting public comment, address the teaching of financial literacy skills and how to provide “useful and necessary information to assist students… when making financial decisions related to student borrowing.”
The best practices include:
Schools will not be required to adopt these best practices.
The bill now heads to the House for approval before heading to the president’s desk for his signature.
Publication Date: 3/16/2018