Reed Leading Effort to Protect Student Borrowers
Senator says addressing college affordability and student debt crisis is key to strengthening our long-term economic future
WASHINGTON, DC – Seeking to cut higher education costs for middle-class families, U.S. Senator Jack Reed is leading the charge on Capitol Hill to help reduce student loan debt.
“College students all over the country will graduate and receive their diploma this spring, but too many of them will also cross the stage with a staggering level of student loan debt to repay. That debt is a burden that will affect their economic choices for years to come, including what career they’ll pursue, when and if they’ll buy a home, and whether they can afford to start thinking about a family. We have to take significant steps to address this student debt crisis that is threatening our economy,” warned Reed.
One of those steps is the Protect Student Borrowers Act of 2015 (S.1102), which Reed introduced this week along with Senators Richard Durbin (D-IL), Elizabeth Warren (D-MA), and Chris Murphy (D-CT). The bill seeks to make institutions of higher education more accountable for student indebtedness by requiring institutions to assume some of the financial risk of student loan default based on the percentage of their graduates and former students who default on their loans. This legislation will also provide incentives and support for institutions to assist their students to effectively manage their debt and reduce defaults.
Student loan borrowers are struggling to repay their debts. According to the Federal Reserve Bank of New York, approximately 17 percent of borrowers were past due on their student debt by more than 90 days in 2012. Department of Education data show that 13.7 percent of student loan borrowers who began repayment in 2011 defaulted by 2014.
“The Protect Student Borrowers Act will ensure that colleges and universities have more skin in the game when it comes to student loan debt by setting stronger market incentives for these institutions to provide better and more affordable education to students, which will in turn help put the brakes on rising student loan defaults,” said Reed. “We need to tackle student loan debt and college affordability from multiple angles, and all stakeholders in the system have to do their part. We can’t tackle the student loan debt crisis without states and institutions also stepping up and taking greater responsibility for college costs and student borrowing.”
Reed also led the charge this week in calling on the Obama Administration to institute a one-stop student loan complaint system at the Consumer Financial Protection Bureau (CFPB). In a letter authored by Reed, Warren, Durbin, and Senator Sherrod Brown (D-OH), the Senators urged Shaun Donovan, the Director of the White House Office of Management and Budget (OMB) to consider using an existing system at the CFPB to help students and borrowers resolve problems with their federal and private student loans, as well as issues with institutions of higher education.
The student loan complaint system is a component of the Student Aid Bill of Rights announced by President Obama this year, which echoed legislation introduced this Congress by Reed, Durbin, and Warren. In their letter to Director Donovan, the senators suggested that utilizing the existing complaint system at the CFPB, which is already equipped to handle consumer complaints, would save time and resources and be preferable to setting up a parallel system at the Department of Education, which could confuse borrowers in need of assistance.
“With student loan debt exceeding an estimated $1.2 trillion and many borrowers continuing to struggle to repay their loans, urgent action is needed to make the current system work better,” the senators wrote. “One of the promising features of the Student Aid Bill of Rights is a state of the art complaint system that students and borrowers could use to resolve problems with their student loans and report problems with institutions of higher education. Fortunately, such a system currently exists at the Consumer Financial Protection Bureau. We ask that you investigate the feasibility of using the CFPB's existing system to intake, track, resolve. report, and analyze student loan complaints for both federal and private student loans. Such a system for federal student loans is long overdue.”
Reed has for years been at the forefront of legislative efforts to tackle the student loan debt crisis and improve college affordability for American students and their families. Reed continued these efforts last month by joining Senator Warren and Congressman Joe Courtney (D-CT-2) in introducing the Bank on Students Emergency Loan Refinancing Act, legislation that would allow those with outstanding student loan debt to refinance at the significantly lower interest rates that were approved last year for new borrowers.
According to a recent analysis of student loan debt by the Federal Reserve Bank of New York, between 2004 and 2014, there was an 89 percent increase in the number of student loan borrowers and a 77 percent increase in the average balance size. Today, over 40 million Americans have student loan debt.