[Congressional Record Volume 156, Number 53 (Thursday, April 15, 2010)]
[Senate]
[Pages S2388-S2389]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. DURBIN (for himself, Mr. Franken, and Mr. Whitehouse):
  S. 3219. A bill to amend title 11, United States Code, with respect 
to certain exceptions to discharge in bankruptcy; to the Committee on 
the Judiciary.
  Mr. DURBIN. Mr. President, three weeks ago, the Senate passed 
significant student loan reform. It turns out that for the past several 
decades, we have been paying banks $6 billion per year to be the middle 
men in our student loan system. The bill we passed puts a stop to that. 
Instead of lining the pockets of bankers like Al Lord at Sallie Mae, we 
will originate all Federal student loans through the Direct Loan 
Program and we will invest the savings, $68 billion, in education 
priorities. We put $36 billion into Pell Grants to increase the grant 
size and tie it to inflation. We also capped monthly student loan 
payments at 10 percent of discretionary income to help ease repayment 
for students in public service careers. We invested in historically 
black colleges and universities, minority serving institutions, 
community colleges, and state-based college access programs that help 
students succeed in college. These reforms are essential in helping 
students afford a college education.
  Today, along with Senator Franken and Senator Whitehouse, I am 
introducing a bill that will take an additional step in restoring 
fairness in student lending by treating privately issued student loans 
in bankruptcy the same way other types of private debt are treated. Our 
bill, the Fairness for Struggling Students Act, will allow borrowers of 
private student loans to discharge those loans in bankruptcy. 
Representatives Cohen and Davis are introducing a similar bill in the 
House.
  Federally issued or guaranteed student loans have been protected 
during personal bankruptcy since 1978. This is a good law that protects 
Federal investments in higher education. In 2005, a provision was added 
to law to protect the investments of private lenders that extend 
private credit--not federally guaranteed student loans--to students. 
With the 2005 protections in place, there is virtually no risk to 
lenders making high-cost private loans to students at schools with low 
graduation rates and even lower job placement rates. So the industry 
has boomed over the past decade. Private student loan volume last year 
was $11 billion.
  But there is plenty of risk for student borrowers. The interest rates 
and fees on private loans can be as onerous as credit cards. There are 
reports of private loans with variable interest rates reaching 18 
percent. Unlike Federal student loans, the Government does not impose 
loan limits on private loans and does not regulate the terms or cost of 
these loans. Some students who take out these loans find themselves 
trapped under an enormous amount of debt that they cannot escape.
  Today, I am pleased to introduce a bill that will give students who 
find themselves in dire financial straits a chance at a new beginning. 
My bill restores the bankruptcy law, as it pertains to private student 
loans, back to where it was before the law was amended in 2005. Under 
this legislation, privately issued student loans will once again be 
dischargeable in bankruptcy. My bill also clarifies that the remaining 
protections are specific to loans that were issued by or are guaranteed 
by State and Federal Government.
  Three weeks ago we ended the ability of lenders and banks to make 
risk-free federal loans to students. It is time to also end the risk-
free nature of private student loans and restore fairness for student 
borrowers.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the text of the bill was ordered to be 
printed in the Record, as follows:

                                S. 3219

         Be it enacted by the Senate and House of Representatives 
     of the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

         This Act may be cited as the ``Fairness for Struggling 
     Students Act of 2010''.

[[Page S2389]]

     SEC. 2. EXCEPTIONS TO DISCHARGE.

         Section 523(a)(8) of title 11, United States Code, is 
     amended by striking ``dependents, for'' and all that follows 
     through the end of subparagraph (B) and inserting 
     ``dependents, for an educational benefit overpayment or loan 
     made, insured, or guaranteed by a governmental unit or made 
     under any program funded in whole or in part by a 
     governmental unit or an obligation to repay funds received 
     from a governmental unit as an educational benefit, 
     scholarship, or stipend;''.

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