WASHINGTON, D.C. – Today U.S. Rep. George Miller (D-CA), the chairman of the House education committee and the lead author of a historic new college affordability law, announced his support for legislation that would allow Americans to discharge their private student loans in bankruptcy, the same way they can discharge other types of private debt. The House Judiciary Committee today held a hearing to examine the bill, the Private Student Loan Bankruptcy Fairness Act of 2010 (H.R. 5043), which was introduced last week by U.S. Reps. Steve Cohen (D-TN) and Danny Davis (D-IL). U.S. Sens. Dick Durbin (D-IL), Sheldon Whitehouse (D-RI), and Al Franken (D-MN) have introduced a companion bill in the Senate.
“Last month, Congress took a groundbreaking step to reform a federal student loan system that for too long worked in the best interests of big banks and corporate tycoons, instead of students and families. Sadly, our nation’s bankruptcy laws are another example of how lenders’ well-heeled lobbyists successfully gamed the system and won special treatment – at the expense of millions of Americans working hard to pay back their college debt.
“In 2008, the Democratic Congress took important steps to provide long overdue consumer protections for students when borrowing financially risky private student loans, but more needs to be done. Private student loans remain far more expensive for borrowers than federal student loans, and often carry tricky terms and conditions. Especially in this economy, private student loan borrowers deserve the same basic protections consumers receive when using their credit cards, buying a car, or paying their electric bills.
“As Congress continues working on reforms to end Wall Street shenanigans, this legislation is a clear, common sense step we can take to restore some financial fairness for millions of consumers. I want to thank Reps. Cohen and Davis for their unparalleled efforts to stand up for students and borrowers around the country and call on all of our colleagues to join us in ending this special giveaway to for-profit companies.”
BACKGROUND
Bankruptcy legislation enacted by President George W. Bush in 2005 included a provision – slipped quietly into the bill – that provided special treatment to for-profit lenders by severely limiting Americans in bankruptcy from discharging the private college loans they borrow.
Unlike federal student loans, which have a cap on interest rates and can have flexible repayment options for borrowers, including an Income Based Repayment program authored by Miller, private student loans have no interest rate cap and no cap on the total amount a student can borrow. Due to this 2005 change, bankruptcy law now treats private student loan borrowers the same as individuals trying to escape child support payments, alimony, overdue taxes and criminal fines.
H.R. 5043 is supported by a broad coalition of student groups, consumer advocates and higher education organizations, including Consumers Union, Consumer Federation of America, The Institute for College Access and Success and the National Association of Student Financial Aid Administrators.
More information on H.R. 5043, the Private Student Loan Bankruptcy Fairness Act of 2010
“In 2008, the Democratic Congress took important steps to provide long overdue consumer protections for students when borrowing financially risky private student loans, but more needs to be done. Private student loans remain far more expensive for borrowers than federal student loans, and often carry tricky terms and conditions. Especially in this economy, private student loan borrowers deserve the same basic protections consumers receive when using their credit cards, buying a car, or paying their electric bills.
“As Congress continues working on reforms to end Wall Street shenanigans, this legislation is a clear, common sense step we can take to restore some financial fairness for millions of consumers. I want to thank Reps. Cohen and Davis for their unparalleled efforts to stand up for students and borrowers around the country and call on all of our colleagues to join us in ending this special giveaway to for-profit companies.”
BACKGROUND
Bankruptcy legislation enacted by President George W. Bush in 2005 included a provision – slipped quietly into the bill – that provided special treatment to for-profit lenders by severely limiting Americans in bankruptcy from discharging the private college loans they borrow.
Unlike federal student loans, which have a cap on interest rates and can have flexible repayment options for borrowers, including an Income Based Repayment program authored by Miller, private student loans have no interest rate cap and no cap on the total amount a student can borrow. Due to this 2005 change, bankruptcy law now treats private student loan borrowers the same as individuals trying to escape child support payments, alimony, overdue taxes and criminal fines.
H.R. 5043 is supported by a broad coalition of student groups, consumer advocates and higher education organizations, including Consumers Union, Consumer Federation of America, The Institute for College Access and Success and the National Association of Student Financial Aid Administrators.
More information on H.R. 5043, the Private Student Loan Bankruptcy Fairness Act of 2010
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