In the state of California, students have experienced dramatic increases in their tuition and other fees over the last decade. This has often forced students to take on a number of private and federal student loans in order for them to be able to continue their education. Unfortunately, upon graduation, many of these students are unable to pay these student debts back.
This is mostly due to the rising unemployment and underemployment rates in the country and the overall weakness of our current economy. These economic factors, as well as the policy that prohibits loan forgiveness through bankruptcy, have led to a skyrocketing of debts. On average, graduates end up with a minimum of $26,000 in debt. However, there are many cases where students end over with well
over $100,000 in student loan debt.
In recent years debt incurred from student loans has reached a record high, with figures now showing it to be well above $1 Trillion dollars. Some even go so far to say that it might even cause a worse crisis
then the one prompted by the country’s credit card debt.
In response to this, an influential legislative package called the Student Bill of Rights has been developed in California. This legislative package was introduced by Bob Wieckowski, a California Assembly member. He stated in an interview that education should serve as a road leading away from poverty. However, the grim state of the national student loan debts shows otherwise.
Wieckowski’s Student Bill of Rights legislative package has three vital component pieces of legislature. Namely, these are Assembly Bill 233, the Know Before You Owe Bill, and Assembly Joint Resolution 11.
Assembly Bill 223
Not being able to pay one’s private student loans on time can lead to serious consequences. One of the most common things that can happen would be wage garnishments. Borrowers who are behind their student loan payments often lose 25% of their paycheck deducted by their employer to pay off their student loans.
Assembly Bill 233 is a bill with the goal of student debt relief in mind. This new piece of legislation seeks to bar the implementation of wage garnishment orders on defaulted student loans which were not ordered or guaranteed by the federal government of the United States.
By putting a stop to the process of wage garnishment, the creditors will be put into a position where they have to establish a closer working relationship with the debtors. Through this legislation, more realistic and a more manageable repayment plans can be put forward. This plan for repayment will be formulated by the two parties involved, each giving valuable input on the subject.
This gives the debtors an opportunity to consolidate student loans. By doing so, they are able to put their finances in order. This will also better enable them to settle their loans in a more timely fashion.
Know Before You Owe Bill
A complementary piece of legislature to the Assembly Bill 223, known as the “Know Before You Owe” Bill, seeks to elevate the debtor’s knowledge on the subject of student loan debt. This is done so by requiring students receiving private loans to attend loan counseling sessions upon entrance and exit. These counseling sessions will also require the attendance of the student’s parents who are acting as co-
This is because most students who involve themselves in private loans often do so without having a basic knowledge of the details surrounding that particular loan. Many students sign up for student loans with unbelievably high variable rates. For instance, a number of these private loans have 20% interest.
Aside from uncapped variable rates, a student loan can be risky in a number of different ways. These private loans often lack the necessary safeguards needed by the students. For instance, some of them lack flexible repayment plans. There are also those that lack deferment options.
Of course, the student’s financial literacy should not start at the university level. Rather, it should start at a much earlier age. It has been suggested that such training should be made part of the K-12 system. This is in order to improve the students’ understanding of personal finance and better appreciate the concepts of credits, savings, and budgeting. Having a basic knowledge of these will make it so that they
are much better prepared these types of situation when they encounter it in the future.
Assembly Joint Resolution 11
For the longest time, declaring bankruptcy did not enough get a person out of his obligations towards private loans. In fact, students have not been able to do so since 2005. This created a particularly problematic situation.
Needless to say, Assembly Joint Resolution 11 was introduced to remedy this specific predicament. It urged Congress to amend particular federal laws surrounding bankruptcy. This resolution seeks to allow debt acquired through private loans to be dismissed when the debtor declares himself to be bankrupt.
Amid the continuously growing student loan debt problem in the country, there have been a number of attempts on the government’s part to remedy the situation. Student Bill of Rights legislative package developed in California is the perfect example of such an attempt since its three key components deals with the various aspects problem itself.