U.S. Congressmen Steve Cohen (D-Tenn) of Memphis and Danny Davis (D-Ill.) co-authored a bill that would change the bankruptcy law to allow college grads to be able to relieve the financial obligations of student loans.
They held a Congressional briefing Monday in front of a standing-room-only audience on "The Crushing Burden of Private Student Loan Debt."
"With students relying more and more on student loans to pay for the rising cost of college, Congress should be looking at ways to make it easier for students to attend college," said Congressman Cohen. "I was pleased that so many young people attended today's briefing so they can better understand the issues that may face them upon graduation."
As the sponsors of H.R. 532, the "Private Student Loan Bankruptcy Fairness Act of 2013," Congressmen Cohen and Davis want to return the bankruptcy law to what it was before 2005 regarding private student loan debt and allow Americans, struggling with overwhelming private student loan debt through no fault of their own, to obtain relief from these crushing financial obligations.
"A hallmark of our Nation's bankruptcy law is to give an honest but unfortunate debtor a chance to obtain meaningful relief," said Congressman Davis. "Unfortunately, without any hearings, in 2005 Congress made private student loans by for-profit lenders extremely difficult to discharge in bankruptcy even after meeting the restrictive criteria for bankruptcy. These changes gave special federal protections to for-profit lenders, penalized borrowers for pursuing higher education, and provided no incentive to private lenders to lend responsibly. Today's briefing highlighted the critical need for Congress to act to restore fairness in student lending by treating privately-issued student loans in bankruptcy the same as other types of private debt."
The Project on Student Debt shows graduates from University of Memphis have an average of $25,629 in debt, graduates from LeMoyne-Owen College have an average of $19,369 in debt, graduates from Christian Brothers University have an average of $22,839 in debt, and graduates from Rhodes College have an average of $26,147 in debt.
As Forbes Magazine reported last month, student loan debt now exceeds more than $1 trillion and Americans now owe more on these debts than they do for credit card debts. Not surprisingly, a recent Wells Fargo study reports that more than half of millennials say student loan debt is their biggest financial concern with 42 percent calling it "overwhelming."
Such crushing student loan debt cripples the ability of Americans to purchase a home or car, start a family, or save for their future, which in turn undermines our Nation's economic recovery. Private student loan debt is particularly problematic because such loans can carry exorbitant interest rates and fees, are marketed aggressively to unsuspecting and vulnerable people, and lack many of the consumer protections of federal student loans.