Posted in: Moving in Congress
Fairness for Struggling Students Act seeks changes to private loan bankruptcy rules
Tag bankruptcy, Fairness for Struggling Students Act, private loans, student loans, U.S. .Sen. Dick Durbin, U.S. Sen. Al Franken, U.S. Sen. Jack Reed, U.S. Sen. Sheldon Whitehouse, U.S. Sen. Tom Harkin
U.S. Sen. Dick Durbin speaks with students at George Washington University
by Mary Ellen Flannery
The Fairness for Struggling Students Act, a bill introduced to Congress this week by Sen. Dick Durbin (D-IL) and two colleagues, could go a long way toward relieving the near-impossible burden of student loan debt that rests on the shoulders of educators like Michael F. Powe of Alabama.
Take Action ›
Send an email to your elected officials in support of the Fairness for Struggling Students Act. Click here ›
Powe, an assistant principal and NEA member, and his wife, also an educator, collectively owe close to $400,000. “We cannot make it much longer,” he said. Their debt burden is so heavy that the couple is considering bankruptcy — “we are sinking under debt that started 20 years ago and was supposed to be negligible. We need bailing out bad!
The Durbin bill, which was also introduced by Senators Al Franken (D-MN) and Tom Harkin (D-IA) and co-sponsored by Senators Sheldon Whitehouse (D-RI) and Jack Reed (D-RI), could go a long way to helping the Powe family and others who hope for a fresh start through bankruptcy. It aims to restore fairness in bankruptcy law by allowing private student loan debt to be discharged in bankruptcy just like any other private debt. This is the way private student loans were treated from 1978 until 2005 when Congress created special protections for private student loan lenders — in a “provision snuck into… reform legislation in the dead of night,” said Whitehouse.
As student loan debt continues to grow, topping $1 trillion total last year or nearly $25,000 per borrower on average, the debt crisis mounts a growing threat to working families, said Durbin. “Too many Americans are carrying around mortgage-sized student loan debt that forces them to put off major life decisions, like buying a home or starting a family…It’s time for action. We can no longer sit by while this student debt bomb keeps ticking.
While many borrowers do take advantage of federal student loans, which have newly expanded repayment options tied to income, many others rely on private loans. Those private loans offer one of the “riskiest, most expensive ways to pay for college,” noted NEA’s Mary Kusler, director of government relations, in a recent letter of support to Durbin.
Like credit cards, private student loans typically have variable interest rates that are highest for the people who can least afford them. But while credit card debt can be discharged in bankruptcy, students who borrow privately to finance their education can carry enormous amounts of debt for their entire lives. “I will die owing this money,” said retired Missouri special educator Nancy Brunner, who owes a whopping $170,000-and-growing in student loans.
In her letter to Durbin, Kusler praised Durbin for working to restore “some fairness to student lending.” She added, “In doing so, it will enable the bankruptcy system to work as a safety net so people can get the education they want with the assurance that they will be protected should their finances come under strain by layoffs, accidents, or other unforeseen events.”