Rep. Davis Concerned over Data Showing African Americans Most Likely to Take Out Dangerous Student Loans

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September 1, 2009
Statements

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 Projecton Student Debt raises concerns for education policymakers because itshows a dramatic increase in students' use of private student loansthat often lack important consumer protections, even when federal loansthat include such protections are available.  For example, privatestudent loans typically have variable interest rates, lack options tomake payments manageable (e.g., deferment, income-based repayment), andare almost impossible to discharge via bankruptcy. 

Davis continued, "Among the findings, the study showed that thepercentage of undergraduates taking out private student loans increasedfrom 5% in 2003-2004 to 14% in 2007-2008.  Further, in 2007-2008,approximately two-thirds (64%) of the students with private loansunder-borrowed federal loans, up from 48% in 2003-2004.  Althoughstudents from all races and ethnicities were equally likely to turn toprivate loans before exhausting their federal loans in 2007-2008,African American students were statistically more likely than otherstudents to borrow private student loans in 2007-2008, with thepercentage quadrupling from 4% to 17% in the last four years.  Thesedata, coupled with the August 2009 analysis by Moody's InvestmentService that private loans made directly to students tend to havehigher default rates, suggest that thousands of students may beunnecessarily turning to loans without consumer protections, increasingthe likelihood of future financial problems." 

"Clearly, there remains a great need for Congressional action tomonitor and develop additional consumer protections in the arena ofprivate student lending.  Although Congress took a number of stepsduring the recent reauthorization of the Higher Education Act to helpstudents and parents make informed borrowing choices, recentregulations fell short in requiring sufficient protections for theseconsumers.  These recent analyses underscore the need for a consumerfinancial protection agency to regulate the provision of financialproducts and services to consumers.  Further, Congress should restorebankruptcy protections afforded to private student loan borrowerssimilar to those protections afforded to other unsecured debtors, aswas the case before 2005."

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