News Column

Bishop, Advocates Highlight Legislation Aimed at Protecting Student Borrowers

May 6, 2014

WASHINGTON, May 6 -- Rep. Timothy H. Bishop, D-N.Y. (1st CD), issued the following news release:

Congressman Tim Bishop joined with fellow Representatives, education advocates and students today to announce legislation to help students who face automatic defaults on private education loans.

Currently, many student borrowers are required to have a co-signer in order to qualify for loans through private lending institutions. If the co-signer, usually a parent or grandparent, suddenly dies or files for bankruptcy, the lender declares an automatic default on the loan - even if the loan payments have been made on time.

The Protecting Students from Automatic Default Act will require private lending institutions to allow a student 90 days to find a new co-signer. It will also require lenders to notify students when a loan is placed in automatic default. Notification is required for changes in the terms of the loan or acceleration of the repayment terms due to the death or bankruptcy of a co-signer.

"The practice of automatically defaulting on student loans without notice to the student or an opportunity for the student to find a new co-signer is deplorable," said Congressman Bishop. "Access to higher education has been shown to be the lynchpin of success in our society. We need to make it easier for students to pay for college or technical school, not pull the rug out from under them when their circumstances change through no fault of their own."

"A college education remains the gateway to the middleclass and that shouldn't be in jeopardy should a loved one pass-away," said Congressman Peter Welch. "I'm proud to support this bill to protect college student borrowers from a tragic double disaster. Students should be able to continue their coursework or their careers, knowing their financing is secure."

"The Protecting Students From Automatic Default Act of 2014 would help protect students who take out nongovernmental loans to finance their education," said Terry W. Hartle, senior vice president of the American Council on Education. "Congressman Bishop's legislation is a common sense remedy that would guarantee the rights of borrowers and prevent avoidable defaults while also protecting the interests of private lenders."

"Borrowers get an education to achieve a better life for their families," said Sophia Zaman, President of the United States Student Association.

"They deserve support during times of grief, not an unexpected bill for the remainder of their student loans. We commend Representative Bishop for introducing the Protecting Students From Automatic Defaults Act to hold student loan lenders accountable and end this unconscionable practice."

"Private student loans need more safeguards for students and the Protecting Students from Automatic Default Act of 2014 puts into place a fair and common sense protection by ensuring borrowers do not automatically end up in default because of the death of a co-signer," said Justin Draeger, President and CEO of the National Association of Student Financial Aid Administration. "Students and schools applaud the efforts of Representatives Bishop and Hinojosa to stop this harmful practice and protect America's students."

According to the Consumer Financial Protection Bureau, when private loans are placed in automatic default it requires the student to pay the full amount immediately. When a student cannot meet that obligation, his or her credit is negatively impacted, affecting the student's ability to purchase a car or rent an apartment.

Congressman Bishop introduced H.R. 4511 on April 29, 2014. It currently has 20 cosponsors and is supported by the following organizations: American Association of Collegiate Registrars and Admissions Officers, American Association of Community Colleges, American Association of State Colleges and Universities, American Council on Education, Association of American Universities, Association of Community College Trustees, Association of Jesuit Colleges and Universities, Association of Public and Land-grant Universities, Council for Christian Colleges & Universities, Council for Higher Education Accreditation, Council for Opportunity in Education, National Association of Independent Colleges and Universities, and the State University of New York (SUNY).

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Source: Targeted News Service

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