Clean Slate through Consolidation Act
- Sponsor
- Rep. Stevens, Haley M. [D-MI-11]
- Committees
- Education and Workforce Committee (primary)
- Last action
- Apr 16, 2026
Bottom line
This bill provides a mechanism for federal student loan borrowers to clear default records from their credit history upon consolidating their defaulted loans into a new Federal Direct Consolidation Loan.
What it actually does
This bill amends the Higher Education Act of 1965 to mandate that federal student loan servicers, guaranty agencies, or loan holders request consumer reporting agencies remove a record of default from a borrower's credit history. This removal is triggered specifically when a borrower obtains a Federal Direct Consolidation Loan that successfully discharges their previously defaulted federal student loan. This aims to provide a "clean slate" for borrowers who consolidate defaulted loans.
Proponents argue
Supporters argue this bill offers a crucial second chance for borrowers who have defaulted on federal student loans but are taking steps to rectify their financial situation through consolidation. They contend that removing the default record incentivizes rehabilitation, improves borrowers' credit scores, and facilitates their access to housing, employment, and other financial opportunities, ultimately contributing to economic stability and reducing the long-term burden of past financial distress.
Opponents contend
Opponents might argue that removing default records from credit history, even after consolidation, could diminish the accountability of borrowers and the integrity of credit reporting systems. They might contend that a default, regardless of subsequent consolidation, reflects a past failure to meet financial obligations and that masking this history could mislead future lenders or creditors about a borrower's true financial risk, potentially encouraging irresponsible borrowing behavior.
The bill is very short and easy to read, allowing ample time for comprehensive understanding.
Section 2, amending Section 455(g) of the Higher Education Act of 1965 (20 U.S.C. 1087e(g))
Removal of Default Record from Credit History upon Loan Consolidation
This provision requires federal student loan servicers, guaranty agencies, or other holders of federal student loans to contact credit reporting agencies. They must request the removal of a default record from a borrower's credit history if that borrower successfully obtains a Federal Direct Consolidation Loan that pays off and discharges their previously defaulted federal loan. This action aims to erase the negative credit impact of the default once the loan is consolidated.
Supporters argue
Supporters argue this provision provides a tangible incentive for borrowers to address their defaulted loans, offering a pathway to financial rehabilitation that extends beyond simply resolving the debt. They believe it aligns with the goal of helping individuals recover from financial setbacks and reintegrate into the mainstream economy, reducing the long-term punitive effects of a past default.
Critics contend
Critics might argue that this provision could create a moral hazard, potentially encouraging some borrowers to default with the expectation that they can easily clear their credit history through consolidation. They may also contend that it undermines the accuracy and reliability of credit reports, which are designed to reflect a borrower's full financial history, including past defaults, for the benefit of future creditors.
Tradeoffs
The provision balances the goal of borrower rehabilitation and economic reintegration against concerns about maintaining the integrity and completeness of credit reporting for future lenders and the potential for moral hazard.