NEW YORK (MainStreet) — Critics of the President Obama's Student Aid Bill of Rights, introduced earlier this month, have raised questions about its vague objectives on student loans. It wants the Department of Education (ED) to ensure that debt collection on defaulted loans is done fairly without providing much detail. It wants to hold loan servicers to a higher standard without specifying what those standards would be.
It will also not allow privately-issued loans to be written off in a bankruptcy as with other types of consumer debt --something that Congress would have to change. The only tangible protection it appears to offer would direct servicers to apply pre-payments to loans with the highest interest rates. But does the buck--and new safeguards--stop there?
Now Senate Democrats seem ready to bolster this initiative with their add-on to Obama's proposal, The Student Loan Borrower Bill of Rights.
Senators Dick Durbin (D-Ill.), Elizabeth Warren (D-Mass.) and Jack Reed (D-R.I.) introduced the bill on Tuesday to ensure that student loan borrowers get a fair shake and understand the repayment options and resources available to them.
“I commend the President’s announcement of additional relief for student borrowers earlier this month, but that doesn’t excuse Congress from addressing our national student debt crisis," said Durbin on Tuesday. While it wasn't clear whether this was a veiled criticism of the White House or his Republican colleagues--or both--Durbin pointed to the 40 million Americans he said were receiving inadequate assistance in paying of some $1.2 trillion in student loans as reason for drafting the legislation. Durbin also wants to allow the write-off of private loans in a bankrupty filing.