In the wake of the Orlando shootings last year, Sen. Marco Rubio (R-Florida) has reintroduced a proposal to create protections for student loan borrowers who are victims of terrorist attacks. The bill is similar to one introduced in Congress last year, but it died on the Senate floor. The new bill seeks to expand the protections afforded student loan borrowers suffering from financial hardship by adding a specialized forbearance for victims of terrorism. Sen. Rubio’s involvement with a victim of the Orlando nightclub terrorist attack, spurred him to revive the bill.
Under the current system, federal student loan borrowers already have access to protections, such as a three-year loan deferment for borrowers suffering a financial hardship. The new bill increases the deferment by one year for victims of terrorism and, depending on the type of federal loan, it stops the interest from accruing during that period.
It’s Been Done Before
Similar special forbearances have been created for natural disasters such as Hurricane Katrina. Victims and family members of the September 11 terrorist attacks were offered a loan forgiveness option. Lawmakers are quick to propose special protections in cases where their constituents have been harmed by terrorism or major natural disasters. The proposals are not very costly and they are an effective way for lawmakers to demonstrate they are looking out for their constituents.
Critics Fear Additional Bureaucracy and Confusion
Critics of the new legislation question the necessity of creating a specialized forbearance for each new specific demographic that comes along since there are already protections in place. They claim that creating separate specialized programs for newly designated demographics unnecessarily adds to the bureaucratic problems that already exist.
The critics point to the fact that federal student loan borrowers are already entitled to deferment and forbearance periods in the case of a financial hardship. The problem is most borrowers aren’t aware of their options either because the information is not readily available or because their loan servicer made no effort to inform them of their protections. Adding another layer of bureaucracy where borrowers already struggle to get the help they need would seem to be counterproductive. The introduction of new protections must come with a plan to ensure they are properly communicated to the targeted group with a dedicated process for accommodating their needs.
Image Copyright Glyn Lowe.