FOR IMMEDIATE RELEASE   

August 25, 2009
Contact:  Jill Hunter-Williams

 

U.S. Congressman Danny K. Davis Concerned over Data Showing African Americans Most Likely to Take Out Dangerous Student Loans

Washington, D.C.- On Tuesday, August 25, 2009, U.S. Congressman Danny K. Davis voiced concern today following the release today of a study indicating that more undergraduate students, and especially African American students, are taking out private student loans today than four years ago. 

Congressmen Danny K. Davis (D-IL) commented:  "The study by the Project on Student Debt raises concerns for education policymakers because it shows a dramatic increase in students' use of private student loans that often lack important consumer protections, even when federal loans that include such protections are available.  For example, private student loans typically have variable interest rates, lack options to make payments manageable (e.g., deferment, income-based repayment), and are almost impossible to discharge via bankruptcy. 

Davis continued, "Among the findings, the study showed that the percentage of undergraduates taking out private student loans increased from 5% in 2003-2004 to 14% in 2007-2008.  Further, in 2007-2008, approximately two-thirds (64%) of the students with private loans under-borrowed federal loans, up from 48% in 2003-2004.  Although students from all races and ethnicities were equally likely to turn to private loans before exhausting their federal loans in 2007-2008, African American students were statistically more likely than other students to borrow private student loans in 2007-2008, with the percentage quadrupling from 4% to 17% in the last four years.  These data, coupled with the August 2009 analysis by Moody's Investment Service that private loans made directly to students tend to have higher default rates, suggest that thousands of students may be unnecessarily turning to loans without consumer protections, increasing the likelihood of future financial problems." 

"Clearly, there remains a great need for Congressional action to monitor and develop additional consumer protections in the arena of private student lending.  Although Congress took a number of steps during the recent reauthorization of the Higher Education Act to help students and parents make informed borrowing choices, recent regulations fell short in requiring sufficient protections for these consumers.  These recent analyses underscore the need for a consumer financial protection agency to regulate the provision of financial products and services to consumers.  Further, Congress should restore bankruptcy protections afforded to private student loan borrowers similar to those protections afforded to other unsecured debtors, as was the case before 2005."

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