On Tuesday, May 22, 2018, Congress passed the Economic Growth, Regulatory Relief, and Consumer Protection Act (P.L. 115-174), which includes new protections for student loan borrowers. The bill is expected to be signed into law by the President.
Two of the changes apply only to new private student loans made 180 days after enactment of the legislation.
- The legislation prevents lenders of private student loans from declaring a private student loan to be in default or otherwise accelerate the debt solely because of the death or bankruptcy of the loan’s consigner. This bans so-called “auto-default” clauses.
- The legislation requires private student loans to release cosigners from their obligation to repay the student loan upon the death of the student borrower.
The legislation also facilitates the creation of loan rehabilitation programs for private student loan programs. It amends the Fair Credit Reporting Act to allow (but not require) lenders to remove a private student loan default from a borrower’s credit history in connection with the borrower’s completion of a loan rehabilitation program. The loan rehabilitation program must require a specified number of consecutive on-time monthly payments that demonstrate “a renewed ability and willingness to repay the loan.” This is a one-time opportunity per loan.
Finally, the legislation requires the Financial Literacy and Education Commission to develop and promote best practices for teaching financial literacy skills at colleges and universities and help college students make smarter borrowing decisions. The best practices will include methods for increasing student awareness of their total debt, monthly payments and repayment options, communicating the importance of graduating on a student’s ability to repay their student loans, and determining the most effective ways of engaging students in financial literacy education.