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Bill would prohibit wage garnishment for student debt

By Jeff Barbosa

AB 233 is part of Wieckowski’s Student Bill of Rights package aimed at reducing debt for California’s college students

SACRAMENTO, Calif. -- With national, student loan debt exceeding $1 trillion and a greater burden than credit card debt, California Assemblyman Bob Wieckowski (D-Fremont) has introduced legislation to prohibit wage garnishment orders on student loans not made, insured or guaranteed by the United States government.

Assembly Bill 233 is part of Wieckowski’s Student Bill of Rights legislative package, which will also include a “Know Before You Owe” bill to require entrance and exit loan counseling for students receiving private loans. On February 6, 2013, Wieckowski also introduced Assembly Joint Resolution 11 urging Congress to change federal bankruptcy laws to allow private loan debt to be discharged through bankruptcy. Since 2005, students have not been able to discharge their debt through bankruptcy.

“Education should be a pathway out of poverty, not into it,” said Wieckowski, a practicing bankruptcy attorney. “Today’s student loan debt crisis is becoming a nightmare for families, nationwide. The sharp rise in student fees, the unemployment or under-employment of graduates and the inability to discharge these debts through bankruptcy have led to situations where debts can exceed $100,000 on rare occasions and approximately $26,000 on average. Having graduates leave school this deep in a financial hole damages our economy and the financial future of young families.”

Those who fall behind on their private student loans can have up to 25 percent of their paychecks garnished. Prohibiting the garnishment of wages will make creditors more inclined to work with the debtor on a repayment plan that is more manageable for students.

“Many of these student loans are ticking financial time bombs for students and their families,” Wieckowski said. “They may have uncapped variable rates, lack flexible repayment plans, deferments and other safeguards for students. By the time the students leave school, they are under water.”

To help educate students and the parents who co-sign on their loans, Wieckowski will also introduce legislation for a “Know Before You Owe” entrance and exit loan counseling requirement on all private student loans.

“Many students take out more risky private loans without even a basic understanding of the terms of that loan,” Wieckowski said. “Interest rates on some uncapped private loans can exceed 20 percent. We must do more to ensure they are well informed about the facts of their specific loans. This is a growing problem nationwide.”

Increasing students overall financial literacy should ideally begin much sooner. Wieckowski is considering legislation to boost financial literacy in K-12 to improve students’ understanding of savings, credit, budgeting and overall personal finance.

Wieckowski will hold a rally in March 2013 at the state Capitol with student organizations and advocates for student loan reform.

Students in California have seen their fees rise dramatically over the last several years as the state’s share of the General Fund targeted for higher education has declined. The passage of Proposition 30 has halted the need for further tuition increases on undergraduates.

In 2012, Wieckowski authored legislation to increase accountability on colleges and universities accepting Cal grants. Although his specific legislation was not approved, it helped bring about even stronger accountability standards adopted through the budget process. Those standards eliminate poorly performing higher education institutions, primarily for-profit institutions, from receiving Cal grant funds. The for-profit higher education industry shoulders a disproportionate share of students with rising debt levels.

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