Davis Applauds Advancement of Legislation to Protect Students with Private Education Loans
“U.S. Representative Danny K. Davis Applauds Advancement of His Legislation to Protect Students with Private Education Loans”
[WASHINGTON, D.C.]– U.S.Representative Danny K. Davis (D-IL) applauded the passage today of hislegislation by the Subcommittee on Commercial and Administrative Law within theU.S. House of Representatives. H.R.5043, the Private Student Loan BankruptcyFairness Act of 2010, will restore fairness in student lending by treatingprivately issued student loans in bankruptcy the same as other types of privatedebt.
Davis said, “A hallmark of our Nation’s bankruptcy law is to givean honest but unfortunate debtor a chance to obtain meaningful relief. Unfortunately, without any hearings,in 2005 Congress made private student loans byfor-profit lenders extremely difficult to discharge in bankruptcy even aftermeeting the restrictive criteria for bankruptcy, treating private student debtin the same manner as debts for criminal penalties and back taxes. Thus,an individual who accumulates thousands of dollars in debt for purchases ofcars or luxury goods can obtain relief via bankruptcy; however, a teacher withprivate student loans cannot.”
Davis continued, “This 2005 change gave special federalprotections to for-profit lenders, penalized borrowers for pursuing highereducation, and provided no incentive to private lenders to lend responsibly.Private education debt is no different than other consumer debt; it involvesprivate profit and deserves no privileged treatment. I am very pleasedthat the Judiciary Committee has examined this legislation closely via twohearings earlier this year and via passage of the bill today.”
Davis added, “Private student loans are oneof the riskiest pathways to pay for college. Like credit card debt, private studentloans typically have uncapped, variable interest rates and lack any form ofconsumer protection, such as fixed interest rates, flexible repayment options, ordebt discharge in the case of disability or death. For these reasons, lenders and financial aidexperts generally agree that students should exhaust federal financial aidprior to using private loans. I can think of no reason to justify treatingfor-profit lenders of educational loans any different than for-profit lendersof credit card debt. I applaud theSubcommittee Members who voted to protect student borrowers seeking to improvetheir lives with education by restoring the bankruptcy protections that existedprior to 2005.”
The Private Student Loan Bankruptcy FairnessAct of 2010 is supported by 29 organizations that are dedicated to consumerprotections and higher education, including: the American Association of Community Colleges; the American Associationof State Colleges and Universities; the American Council on Education; theAmerican Federation of Teachers; the Institute for College Access and Success;National Association for Equal Opportunity in Higher Education; and theNational Consumer Law Center.