Bill Overview
Title: Student Loan Rehabilitation and Credit Score Improvement Act of 2022
Description: This bill provides for the removal of any adverse credit history related to a federal student loan from a borrower's credit history once the borrower has completed loan rehabilitation.
Sponsors: Rep. Williams, Nikema [D-GA-5]
Target Audience
Population: People with federal student loans subject to rehabilitation for adverse credit events
Estimated Size: 43000000
- As of 2022, approximately 43 million people in the United States had federal student loan debt.
- Many of these borrowers have faced financial hardship and may have adverse credit histories due to challenges in repaying these loans.
- Loan rehabilitation is a program that allows borrowers who have defaulted on their federal student loans to have this default removed from their credit report after agreeing to make a certain number of on-time payments, which would significantly impact their credit scores.
- Credit score improvements can positively influence borrowers' ability to access credit facilities for mortgages, car loans, and other financial products.
- The bill specifically targets borrowers within the federal student loan system who have adverse credit events due to default but are working towards rehabilitation.
Reasoning
- The Student Loan Rehabilitation and Credit Score Improvement Act of 2022 targets borrowers with adverse credit histories due to federal student loans in default.
- Currently, there are approximately 43 million people in the U.S. with federal student loan debt, and not all these individuals are in default or eligible for rehabilitation.
- The policy will primarily impact those actively pursuing loan rehabilitation and facing significant barriers due to poor credit caused by defaulted loans, a smaller, distinct subset of the overall 43 million borrowers.
- Given the budget constraints, not all eligible individuals can benefit from this policy simultaneously.
- The policy is likely to significantly benefit those who are completed or near completion of loan rehabilitation, enhancing their credit scores and lowering barriers to accessing other financial resources.
Simulated Interviews
Recent college graduate (New York, NY)
Age: 24 | Gender: female
Wellbeing Before Policy: 4
Duration of Impact: 20.0 years
Commonness: 6/20
Statement of Opinion:
- I hope this policy passes because it's tough finding an apartment with bad credit.
- I need a chance to start my career without my credit holding me back.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 4 |
| Year 2 | 7 | 4 |
| Year 3 | 7 | 5 |
| Year 5 | 8 | 6 |
| Year 10 | 8 | 7 |
| Year 20 | 9 | 7 |
Teacher (Chicago, IL)
Age: 40 | Gender: male
Wellbeing Before Policy: 5
Duration of Impact: 5.0 years
Commonness: 8/20
Statement of Opinion:
- It would be great if my default was cleared from my credit report. This could help me get a better mortgage rate.
- Right now, my credit score limits my financial options significantly.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 5 |
| Year 2 | 8 | 6 |
| Year 3 | 8 | 6 |
| Year 5 | 9 | 7 |
| Year 10 | 8 | 8 |
| Year 20 | 8 | 8 |
Software Engineer (Austin, TX)
Age: 30 | Gender: female
Wellbeing Before Policy: 6
Duration of Impact: 10.0 years
Commonness: 5/20
Statement of Opinion:
- Erasing the default from my credit will open up opportunities for me, especially in buying a house.
- It's a pathway to stability for many people like me.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 6 |
| Year 2 | 8 | 7 |
| Year 3 | 9 | 7 |
| Year 5 | 9 | 8 |
| Year 10 | 9 | 9 |
| Year 20 | 9 | 8 |
Business Owner (Los Angeles, CA)
Age: 50 | Gender: male
Wellbeing Before Policy: 5
Duration of Impact: 10.0 years
Commonness: 4/20
Statement of Opinion:
- I have a successful business, but my old student loan default still affects my credit score.
- Removing it will help greatly with business expansion plans.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 5 |
| Year 2 | 7 | 5 |
| Year 3 | 8 | 6 |
| Year 5 | 8 | 6 |
| Year 10 | 8 | 7 |
| Year 20 | 8 | 7 |
Freelance Artist (Portland, OR)
Age: 35 | Gender: other
Wellbeing Before Policy: 3
Duration of Impact: 20.0 years
Commonness: 7/20
Statement of Opinion:
- This policy would be a lifesaver. It's hard to access opportunities as a freelancer with bad credit.
- I'm looking forward to a time when my past doesn't limit my future.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 3 |
| Year 2 | 7 | 4 |
| Year 3 | 7 | 5 |
| Year 5 | 8 | 6 |
| Year 10 | 8 | 7 |
| Year 20 | 8 | 7 |
Nurse (Atlanta, GA)
Age: 28 | Gender: female
Wellbeing Before Policy: 4
Duration of Impact: 15.0 years
Commonness: 7/20
Statement of Opinion:
- It would be amazing to clear this default from my past; I never fully recovered financially from that period.
- I want to apply for a loan to specialize further in my field, but my credit score is a barrier.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 4 |
| Year 2 | 7 | 5 |
| Year 3 | 8 | 6 |
| Year 5 | 8 | 7 |
| Year 10 | 9 | 8 |
| Year 20 | 9 | 8 |
Warehouse Manager (Miami, FL)
Age: 45 | Gender: male
Wellbeing Before Policy: 4
Duration of Impact: 10.0 years
Commonness: 6/20
Statement of Opinion:
- Fixing my credit would mean I could look for better job opportunities and perhaps even start my own business.
- The burden of a bad credit score due to default is enormous and affects everyday life.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 4 |
| Year 2 | 7 | 5 |
| Year 3 | 7 | 5 |
| Year 5 | 7 | 6 |
| Year 10 | 8 | 7 |
| Year 20 | 8 | 7 |
Marketing Consultant (Denver, CO)
Age: 32 | Gender: female
Wellbeing Before Policy: 5
Duration of Impact: 15.0 years
Commonness: 5/20
Statement of Opinion:
- My credit has been a struggle since that default, and this policy would open many doors to better manage my lifestyle.
- Access to better credit would help me balance my work and personal life needs.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 5 |
| Year 2 | 8 | 6 |
| Year 3 | 8 | 6 |
| Year 5 | 8 | 7 |
| Year 10 | 9 | 8 |
| Year 20 | 9 | 8 |
Barista (Seattle, WA)
Age: 29 | Gender: male
Wellbeing Before Policy: 4
Duration of Impact: 20.0 years
Commonness: 6/20
Statement of Opinion:
- A better credit score could change my life, allowing me to apply for jobs that require financial checks.
- I support this policy and hope it gets through quickly.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 4 |
| Year 2 | 7 | 5 |
| Year 3 | 8 | 6 |
| Year 5 | 8 | 7 |
| Year 10 | 9 | 8 |
| Year 20 | 9 | 8 |
Retired (Boston, MA)
Age: 60 | Gender: female
Wellbeing Before Policy: 5
Duration of Impact: 5.0 years
Commonness: 3/20
Statement of Opinion:
- Any policy that could clear my default after all these years would allow better financial security, especially with health costs.
- This policy will help long-term borrowers like myself.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 5 |
| Year 2 | 6 | 5 |
| Year 3 | 7 | 6 |
| Year 5 | 7 | 6 |
| Year 10 | 7 | 6 |
| Year 20 | 7 | 6 |
Cost Estimates
Year 1: $350000000 (Low: $300000000, High: $400000000)
Year 2: $250000000 (Low: $200000000, High: $300000000)
Year 3: $200000000 (Low: $150000000, High: $250000000)
Year 5: $150000000 (Low: $100000000, High: $200000000)
Year 10: $150000000 (Low: $100000000, High: $200000000)
Year 100: $150000000 (Low: $100000000, High: $200000000)
Key Considerations
- The policy does not directly allocate federal spending for loan forgiveness but rather aims at enhancing borrowers' credit profiles.
- The fluctuating range of benefits due to differing borrower financial behaviors post-credit rehabilitation.
- Potential need for coordination with multiple credit agencies and bureaus, which could impact efficiency and cost.