Bill Overview
Title: Clean Slate through Consolidation Act
Description: This bill provides for the removal of any adverse credit history related to a defaulted federal student loan from a borrower's credit history once the borrower has obtained a Federal Direct Consolidation Loan discharging the borrower's liability on the defaulted loan.
Sponsors: Rep. Stevens, Haley M. [D-MI-11]
Target Audience
Population: Borrowers with defaulted federal student loans who consolidate
Estimated Size: 5000000
- The bill impacts borrowers with defaulted federal student loans as it pertains to their credit histories.
- In the United States, millions have student loans, and a significant portion of them are in default, affecting their credit scores.
- Federal Direct Consolidation Loans are used by borrowers to consolidate multiple federal student loans into one, possibly making repayment easier and more manageable.
- The key impact is on those who have defaulted on loans but have taken positive steps to consolidate and manage their repayment through a consolidation loan.
Reasoning
- The policy targets individuals who have defaulted on federal student loans and have taken steps to consolidate those loans, which is a commonly pursued option among those seeking to repair their credit scores after default.
- Approximately 6.5 million Americans have defaulted on their student loans, and many may take advantage of this opportunity if they choose to consolidate their loans.
- The diversity in individual circumstances, such as age, gender, occupation, and place of residence, should be reflected to give a rounder picture of how this policy might affect various sub-groups within the target population.
- Given the budget constraints of $150 million in year 1, not all 6.5 million defaulted borrowers will be impacted immediately, suggesting a need for a phased or prioritized implementation based on eligibility or application timing.
Simulated Interviews
graphic designer (New York City, NY)
Age: 28 | Gender: female
Wellbeing Before Policy: 4
Duration of Impact: 20.0 years
Commonness: 15/20
Statement of Opinion:
- I think this policy would really help me fix my credit score, and that means I could finally think about getting a car loan or even a mortgage someday.
- The stress from defaulting has been overwhelming, and consolidating my loans seems like a great chance to get back on track.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 5 | 4 |
| Year 2 | 6 | 4 |
| Year 3 | 7 | 4 |
| Year 5 | 8 | 5 |
| Year 10 | 9 | 6 |
| Year 20 | 9 | 6 |
software engineer (Austin, TX)
Age: 35 | Gender: male
Wellbeing Before Policy: 6
Duration of Impact: 15.0 years
Commonness: 20/20
Statement of Opinion:
- I've been planning to consolidate my loans to get a handle on my finances and improve my credit.
- This policy seems like a good step toward financial recovery for me.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 6 |
| Year 2 | 7 | 6 |
| Year 3 | 8 | 6 |
| Year 5 | 8 | 7 |
| Year 10 | 8 | 7 |
| Year 20 | 8 | 7 |
nurse (Cleveland, OH)
Age: 42 | Gender: female
Wellbeing Before Policy: 5
Duration of Impact: 20.0 years
Commonness: 10/20
Statement of Opinion:
- It would be such a relief to have my credit score improved. My loan default has been preventing me from moving forward financially.
- I'm definitely interested in consolidating if it will clear some of my credit issues.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 5 |
| Year 2 | 7 | 5 |
| Year 3 | 7 | 5 |
| Year 5 | 8 | 6 |
| Year 10 | 9 | 7 |
| Year 20 | 9 | 7 |
barista (San Francisco, CA)
Age: 24 | Gender: other
Wellbeing Before Policy: 3
Duration of Impact: 20.0 years
Commonness: 8/20
Statement of Opinion:
- This policy is like a second chance. I'm trying to get steady work, and fixed credit would really help.
- Until my credit is repaired, I feel stuck, so a loan consolidation could be a significant benefit.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 5 | 3 |
| Year 2 | 6 | 3 |
| Year 3 | 7 | 3 |
| Year 5 | 8 | 4 |
| Year 10 | 9 | 5 |
| Year 20 | 9 | 6 |
small business owner (Rural Alabama)
Age: 50 | Gender: male
Wellbeing Before Policy: 4
Duration of Impact: 15.0 years
Commonness: 5/20
Statement of Opinion:
- I've been trying my best to keep my business afloat, but bad credit has been a roadblock.
- I'm cautiously optimistic this could help if it allows me to improve my credit standing.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 5 | 4 |
| Year 2 | 6 | 4 |
| Year 3 | 6 | 4 |
| Year 5 | 7 | 5 |
| Year 10 | 7 | 5 |
| Year 20 | 8 | 6 |
teacher (Miami, FL)
Age: 31 | Gender: female
Wellbeing Before Policy: 5
Duration of Impact: 10.0 years
Commonness: 18/20
Statement of Opinion:
- Consolidating seems like a smart step, especially if my credit score will benefit.
- This policy makes me feel like there’s hope to overcome my credit challenges.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 5 |
| Year 2 | 7 | 5 |
| Year 3 | 7 | 5 |
| Year 5 | 8 | 6 |
| Year 10 | 8 | 7 |
| Year 20 | 8 | 7 |
truck driver (Chicago, IL)
Age: 53 | Gender: male
Wellbeing Before Policy: 5
Duration of Impact: 20.0 years
Commonness: 12/20
Statement of Opinion:
- I've been struggling to boost my credit after defaulting, and a positive change here is desperately needed.
- This bill could be the boost I need to fully get back on my feet.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 5 |
| Year 2 | 7 | 5 |
| Year 3 | 7 | 5 |
| Year 5 | 7 | 6 |
| Year 10 | 8 | 6 |
| Year 20 | 8 | 7 |
marketing assistant (Los Angeles, CA)
Age: 22 | Gender: female
Wellbeing Before Policy: 4
Duration of Impact: 20.0 years
Commonness: 14/20
Statement of Opinion:
- I’m grateful for the opportunity this policy presents to improve my credit history.
- I’ll definitely aim for consolidation to take advantage of this.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 5 | 4 |
| Year 2 | 6 | 4 |
| Year 3 | 7 | 4 |
| Year 5 | 8 | 5 |
| Year 10 | 8 | 6 |
| Year 20 | 9 | 7 |
web developer (Seattle, WA)
Age: 26 | Gender: male
Wellbeing Before Policy: 6
Duration of Impact: 5.0 years
Commonness: 12/20
Statement of Opinion:
- While I’m not in default, knowing there’s a safety net helps reduce stress.
- If I do end up defaulting, knowing I can consolidate could make a massive difference.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 6 |
| Year 2 | 6 | 6 |
| Year 3 | 7 | 6 |
| Year 5 | 7 | 6 |
| Year 10 | 7 | 6 |
| Year 20 | 7 | 7 |
accountant (Detroit, MI)
Age: 45 | Gender: female
Wellbeing Before Policy: 5
Duration of Impact: 15.0 years
Commonness: 8/20
Statement of Opinion:
- Anything that can help me rebuild my credit is a step in the right direction.
- This policy gives me hope for future financial stability and repair.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 5 |
| Year 2 | 6 | 5 |
| Year 3 | 7 | 5 |
| Year 5 | 8 | 6 |
| Year 10 | 8 | 7 |
| Year 20 | 8 | 7 |
Cost Estimates
Year 1: $150000000 (Low: $100000000, High: $200000000)
Year 2: $150000000 (Low: $90000000, High: $210000000)
Year 3: $160000000 (Low: $95000000, High: $220000000)
Year 5: $170000000 (Low: $100000000, High: $230000000)
Year 10: $190000000 (Low: $120000000, High: $260000000)
Year 100: $220000000 (Low: $150000000, High: $300000000)
Key Considerations
- The administrative burden and cost on federal agencies to implement the credit history changes and consolidate the loans.
- The potential positive effect on borrowers' financial stability and credit access.
- Impact on private financial institutions and credit markets due to the change in credit profiles of a large number of borrowers.