Rep. Miller Supports Bill to Restore Fairness in Private Student Lending
WASHINGTON, D.C. – Today U.S. Rep. George Miller (D-CA), the senior Democratic member of the House Education and the Workforce Committee, announced his support for legislation introduced yesterday to restore fairness in student loan lending. The Private Student Loan Bankruptcy Fairness Act of 2013 would treat privately-issued student loans the same as other types of consumer debt in bankruptcy.
“Not all loan debt is created equal. Private student loans have rightly been described as the ‘wild west’ of lending. They do not contain the consumer protections and are generally much more expensive than federal student loans. And worse, unlike almost any other form of consumer credit, it is almost impossible to discharge private student loans in bankruptcy. This is wrong. That’s why I support this bill to restore basic consumer protections for student-borrowers and remove this special-interest provision slipped in by big banks.
“A higher education is more important than ever. Unfortunately, the costs to attain a new skill or a traditional degree continue to rise, pushing more students to finance their education through loan debt. While Congress and states must address the underlying causes of growing costs and debt for students, Congress should pass this bill in the meantime to provide basic bankruptcy protections for student-borrowers that have hit hard times.”
BACKGROUND
Bankruptcy legislation enacted by President George W. Bush in 2005 included a special-interest provision slipped into the bill that provided special treatment for these private student loans by severely limiting the ability to discharge this debt in bankruptcy. As a result, bankruptcy law now treats private student loan borrowers the same as individuals trying to escape child support payments, alimony, overdue taxes and criminal fines.
According to the Consumer Financial Protection Bureau, private student loans account for approximately $150 billion in student debt. 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.
The Private Student Loan Bankruptcy Fairness Act of 2013, introduced by Reps. Steve Cohen (D-TN) and Danny Davis (D-Ill.), is supported by a broad coalition of student groups, consumer advocates and higher education organizations, including the American Council on Education (ACE), the Center for Responsible Lending, Consumers Union, National Council of La Raza, The Institute for College Access and Success and the US Public Interest Research Group (PIRG).
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