[Congressional Record Volume 157, Number 74 (Thursday, May 26, 2011)]
[Senate]
[Pages S3435-S3437]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. DURBIN (for himself, Mr. Franken, and Mr. Whitehouse):
  S. 1102. 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, over the past year, students in Illinois 
have told me their stories of leaving some for-profit colleges with 
mountains of student loan debt and no job prospects. The students who 
find themselves in this terrible situation often end up defaulting on 
their loans. One quarter of students who took out Federal loans to 
attend for-profit colleges defaulted within three years of starting 
repayment. Compare that to 11 percent at public colleges and 8 percent 
at private nonprofit colleges.
  The situation for students who take out private student loans to 
attend for-profit schools can be even worse. A study by the College 
Board found that students at for-profit schools, unable to get enough 
government aid to pay their tuition turn to private loans much more 
than students at traditional schools.
  Many large for-profit colleges have begun making loans directly to 
their students. This private lending can be a boon for the schools. It 
keeps students in school. It helps the college meet its ``90/10'' 
requirement, which keeps the student aid flowing.
  Disturbingly, some of the for-profit colleges making these loans do 
not expect to collect them easily. Corinthian Colleges Executive Vice 
President and Chief Financial Officer Ken Ord stated in the February 
2010 investor call that they anticipate a 56 percent to 58 percent 
default rate on an estimated $150 million in internal student lending. 
Just last month, Ken Ord stated that Corinthian Colleges will seek to 
nearly double this loan volume.
  For-profit colleges like Corinthian are making private loans to 
students knowing that a majority of the students will struggle to make 
payments. These companies make significant profits from federal 
financial aid programs and are able to write off these loans.
  This is a disaster for students. These are private student loans with 
interest rates and fees that can be as onerous as credit cards. There 
are reports of private loans with variable interest rates reaching 18 
percent. Unlike Federal student loans, there are few consumer 
protections available for private student loans. Some students who take 
out private loans find themselves trapped under an enormous amount of 
debt that they cannot escape. Because of a 2005 change to the 
bankruptcy law, they are stuck with this debt for the rest of their 
lives.
  Today, along with Senator Franken and Senator Whitehouse, I am 
introducing a bill that will restore fairness for these students and 
others who find themselves buried in private student loan debt. Our 
bill, the Fairness for Struggling Students Act, will allow borrowers of 
private student loans to discharge those loans in bankruptcy, just as 
other types of private debt can be discharged. Representatives Cohen 
and Davis are introducing a similar bill in the House.
  Before 2005, private student loans issued by for-profit lenders were 
appropriately treated like credit card debt and other similar types of 
unsecured consumer debt in bankruptcy. In 2005, a provision was added 
to law to protect the investments of private lenders that extend 
private credit to students. The industry has boomed over the past 
decade. Private student loan volume last year was $8.5 billion.
  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, to the statute in place before the law was amended in 2005. 
Under this legislation, privately issued student loans will once again 
be dischargeable in bankruptcy.
  The bankruptcy law was designed to give debtors in severe financial 
distress a chance for meaningful relief. The current bankruptcy law 
unjustly punishes men and women who have tried to improve their lives 
by pursuing a higher education and all too often became victims of 
predatory private student lenders or predatory for-profit colleges. It 
is time to restore fairness for student borrowers. I urge my colleagues 
to support this bill.
  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. 1102

       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 2011''.

     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

[[Page S3437]]

     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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