Nearly a decade after the financial crisis of 2007-08, the Senate recently advanced the most significant overhaul of the Dodd–Frank Wall Street Reform and Consumer Protection Act, signed into federal law by President Barack H. Obama on July 21, 2010. Specifically, on March 14, 2018, the Senate passed the Economic Growth, Regulatory Relief, and Consumer Protection Act. Among the many alterations to existing law authorized by this latest foray into banking regulation, the bill effectuates three changes to the legal regime governing student financial aid.

First, lenders would no longer be able to declare that a student loan is in default when a co-signer dies or declares bankruptcy, effectively endorsing a policy followed by a handful of lenders. In a telling historical parallel, similar auto defaults have left borrowers with no choice but to repay the full balance or risk ruining their credit. Although this provision releases the cosigner, it does not force private lenders to forgive the loan of the deceased and allows them to recoup any balance from a deceased’s estate. In addition, it applies only to new private loan borrowers and does not cover students whose spouses cosigned their loans.

Second, a consumer would be entitled to request that a financial institution remove a reported default regarding a private education loan from his or her credit record as long as: (1) the financial institution chooses to offer a loan rehabilitation program which includes, without limitation, a requirement of the consumer to make consecutive on-time monthly payments in a number that demonstrates, in the assessment of the financial institution offering the loan rehabilitation program, a renewed ability and willingness to repay the loan; and (2) the requirements of the particular loan rehabilitation program have been successfully met. Departing from some other proposals, the bill does not compel financial institutions to establish any such rehabilitation program or require credit agencies to honor a borrower’s plea. Further limiting its likely utility, a consumer may invoke this option only once per loan.

Third, in an amendment of the Financial Literacy and Education Improvement Act, the United States Securities and Exchange Commission must establish best practices for institutions of higher education regarding methods to “teach financial literacy skills” and “provide useful and necessary information to assist students at institutions of higher education when making financial decisions related to student borrowing.” These practices, to be set only after consultation with interested institutions and solicitation of public comments, must include the following: (1) “[m]ethods to ensure that each student has a clear sense of the student’s total borrowing obligations, including monthly payments, and repayment options”; (2) “[t]he most effective ways to engage students in financial literacy education, including frequency and timing of communication with students”; (3) “[i]nformation on how to target different student populations, including part-time students, first-time students, and other nontraditional students”; and (4) “[w]ays to clearly communicate the importance of graduating on a student’s ability to repay student loans.” Even after formalizing these practices, the Commission must “maintain and periodically update th[is] . . . information.” Once again, the bill leaves covered entities free to adopt the SEC’s prospective best practices—or ignore them.

The bill now heads to the House of Representatives for either approval or reconciliation before heading to the President’s desk for his signature. Rep. Thomas Jeb Hensarling, Chairman of the House Financial Services Committee, has voiced some objections to the Senate’s overhaul. Indeed, Hensarling’s committee has already circulated a list of 29 bills with bipartisan support that he wants considered in a compromise package.

A copy of the bill as passed can be found here.