U. S. Sen. Dick Durbin (D-Ill.) announced plans to introduce legislation that would protect students from being overwhelmed by private-loan payments. If passed, the bill would ensure that students who take out private loans, which have no interest-rate limits and few alternative repayment plans, understand the options and resources available to them. It also would encourage fair treatment of students by institutions that service the loans.
One example of out-of-control private loans comes from 32-year-old Hannah Moore, who worked two to three jobs to try to pay off a student loan, with help from her father, but still saw her debt balloon from $90,000 to $165,000. Moore earned a degree in 2007 and said that she made consistent and timely payments of $800 a month for more than three years; however, the principal and interest kept increasing. Even after appealing to federal authorities and student lender Sallie Mae, Moore is still $155,000 in debt.
About 96 percent of students at for-profit colleges take out loans, compared to about 50 percent at traditional four-year colleges, according to the U.S. Department of Education. Durbin’s bill would give student-loan borrowers options before they default; would require that they be told about key terms and conditions of the loan as well as how to reach the loan servicer; and would give them the right to have errors resolved quickly and promotions honored.