Wall Street Reform Inpacts Student Loans
Jun 29th, 2010 @ 8:55 AM by Debbie Dragon
Last week legislators reached an agreement to overhaul the financial system, providing the biggest changes seen since the 1930s. The legislation, does not appease everyone, but does make some significant changes that are meant to prevent another financial crisis. The proposal can be found in a 2000 page document.
The plan is calling for amongst other things, a Consumer Financial Protection Bureau to be developed, regulators to watch out for major risks to the financial system, tougher regulations to prevent another economic meltdown and government power to seize and break up companies that are at risk for hurting the American economy.
One area being impacted by the reform will be the private student loan industry. Currently there is little protection to consumers taking out private student loans. Students and families that are looking to fund college are many times left with no other option than private student loans.
These new regulations will help to protect consumers of private student loans, as all private student loans would be regulated under the new Consumer Financial Protection Agency.
“We congratulate House and Senate conferees for reaching agreement on historic financial reforms, including a much-needed Consumer Financial Protection Bureau with authority over risky private student loans and other financial products,” Pauline Abernathy, vice president of the Institute for College Access and Success, said in a news release about the legislation.
With the changes a student loan ombudsman position would be created within the new Protection Agency. Many feel this is a long overdue need, as there has always been little protection or help for those that choose to fund their college educations through private student loans.
This position would allow private student loan borrowers a “central place to go,” Abernathy said, “to someone who is looking at all the issues, and who can flag the issues [for the bureau's regulators and members of Congress], and draw attention to them.”
As a final note, some student loan advocates were disappointed that a provision requiring private lenders verify with the prospective student’s college or university that the student was indeed eligible for the loan was not included. This provision would have given schools the opportunity to council students and make sure that they knew all of their lending options before going with private loan funding.
Debbie Dragon is a full time freelance writer and the co-owner of ReliableWriters.com.