Should Colleges Be On The Hook When Students Can’t Repay Their Loans?

Career College Central summary:

  • One out of every seven borrowers with student loan debt falls behind on payments within three years. The question is: Who should pay for those missed payments? Under a new proposal from three Senate Democrats, the schools should be on the hook.
  • Before Christmas, senators Elizabeth Warren (D-Mass.), Jack Reed (D-R.I.), and Dick Durbin (D-Ill.) released a slate of proposed reforms aimed at lowering student debt. In addition to a student borrower’s bill of rights that would put more emphasis on getting servicers to offer students affordable repayment plans, the senators want schools with lots of struggling borrowers to compensate the government for loan repayment losses.
  • The penalty proposed in the Protect Student Borrowers Act of 2013 would affect schools at which at least a quarter of students take out loans, a threshold that would include most institutions. Inside Higher Ed reports that community colleges would be excempt, along with historically black institutions. The proposal would force schools to pay a penalty, along a sliding scale, based on how frequently students default on their loans.

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