09.23.09
“I want to thank Chairman Cohen and the House Judiciary Subcommittee on Commercial and Administrative Law for examining this critical issue that affects student loan borrowers past, present and future – many of whom are struggling more than ever to make ends meet. I also want to commend Rep. Danny Davis, a former member of my committee, who has been fighting for years to correct this injustice.
“Today, Americans who file for bankruptcy face significant obstacles in discharging private student loans, obstacles they do not face with respect to other type of consumer debt – credit card debt, car loans, and mortgage and utility bills. Due to provisions that were quietly slipped into a 2005 bankruptcy law, individuals who borrow college loans from private lenders find it almost impossible to wipe out those loans in bankruptcy – a change that gives special treatment to lenders and levies a devastating penalty on students.
“In fact, current laws treat student loan borrowers exactly the same as people trying to escape child support payments, alimony, overdue taxes and criminal fines. At a time when we should be doing everything we can to help Americans get a good education and contribute to our economy, people should not be punished for trying to get a college degree.
“Filing for bankruptcy is a last resort for Americans who can no longer manage their debt, in many cases because of a job loss, a death in the family, a major medical emergency, or another catastrophic event. Private student loans – which can carry interest rates as high as 18 percent – are often marketed aggressively to young Americans who may not be able to pay them back. There’s no justifiable reason that the lenders who provide them should be treated any differently than credit card companies, auto finance companies, utility providers, and other creditors.
“With more Americans turning to loans to pay for college in this economy, there’s a growing need to protect students from financially riskier private student loans and predatory lending practices. In 2008, Congress made important strides by enacting long overdue consumer protections for students when taking out and repaying private loans. As this Congress begins to reexamine the way our lending and credit industries operate, we should take the next step by ensuring that the basic protections consumers receive when buying a home, a car, a TV and other forms of credit also apply to private student loans. It’s long past time to end this special giveaway for for-profit lenders – and stop shackling Americans with unmanageable student debt.”
BACKGROUND
In 2008, during House consideration of the Higher Education Opportunity Act, Rep. Danny Davis (D-IL), offered an amendment to treat student loan companies like any other creditor when an individual files for bankruptcy, as they were prior to the 2005 law. Miller supported the amendment, but it was defeated.
The Higher Education Opportunity Act, which was signed in August 2008, includes new protections for consumers when borrowing both federal and private student loans, including greater transparency and disclosures of all terms and conditions on loans. It also prohibits deceptive marketing practices by lenders. For more information, click here.
Changes to Bankruptcy Laws Needed to Protect Student Borrowers, Says Chairman Miller
WASHINGTON, D.C. – U.S. Rep. George Miller (D-CA), the chairman of the House Education and Labor Committee, today praised the House Judiciary Committee for holding a hearing to examine the need to allow Americans to discharge their private student loans in bankruptcy. Bankruptcy legislation enacted by President Bush in 2005 severely limits individuals in bankruptcy from discharging the college loans they borrow from for-profit lenders. Miller, the author of a 2008 law that provided new consumer protections to private student loan borrowers, said that Congress should reexamine this unfair policy as it considers larger changes to the larger financial system and the credit markets.“I want to thank Chairman Cohen and the House Judiciary Subcommittee on Commercial and Administrative Law for examining this critical issue that affects student loan borrowers past, present and future – many of whom are struggling more than ever to make ends meet. I also want to commend Rep. Danny Davis, a former member of my committee, who has been fighting for years to correct this injustice.
“Today, Americans who file for bankruptcy face significant obstacles in discharging private student loans, obstacles they do not face with respect to other type of consumer debt – credit card debt, car loans, and mortgage and utility bills. Due to provisions that were quietly slipped into a 2005 bankruptcy law, individuals who borrow college loans from private lenders find it almost impossible to wipe out those loans in bankruptcy – a change that gives special treatment to lenders and levies a devastating penalty on students.
“In fact, current laws treat student loan borrowers exactly the same as people trying to escape child support payments, alimony, overdue taxes and criminal fines. At a time when we should be doing everything we can to help Americans get a good education and contribute to our economy, people should not be punished for trying to get a college degree.
“Filing for bankruptcy is a last resort for Americans who can no longer manage their debt, in many cases because of a job loss, a death in the family, a major medical emergency, or another catastrophic event. Private student loans – which can carry interest rates as high as 18 percent – are often marketed aggressively to young Americans who may not be able to pay them back. There’s no justifiable reason that the lenders who provide them should be treated any differently than credit card companies, auto finance companies, utility providers, and other creditors.
“With more Americans turning to loans to pay for college in this economy, there’s a growing need to protect students from financially riskier private student loans and predatory lending practices. In 2008, Congress made important strides by enacting long overdue consumer protections for students when taking out and repaying private loans. As this Congress begins to reexamine the way our lending and credit industries operate, we should take the next step by ensuring that the basic protections consumers receive when buying a home, a car, a TV and other forms of credit also apply to private student loans. It’s long past time to end this special giveaway for for-profit lenders – and stop shackling Americans with unmanageable student debt.”
BACKGROUND
In 2008, during House consideration of the Higher Education Opportunity Act, Rep. Danny Davis (D-IL), offered an amendment to treat student loan companies like any other creditor when an individual files for bankruptcy, as they were prior to the 2005 law. Miller supported the amendment, but it was defeated.
The Higher Education Opportunity Act, which was signed in August 2008, includes new protections for consumers when borrowing both federal and private student loans, including greater transparency and disclosures of all terms and conditions on loans. It also prohibits deceptive marketing practices by lenders. For more information, click here.
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