[Congressional Record Volume 159, Number 8 (Wednesday, January 23, 2013)]
[Senate]
[Pages S220-S222]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. DURBIN (for himself, Mr. Harkin, and Mr. Franken):
  S. 113. A bill to amend the Truth in Lending Act and the Higher 
Education Act of 1965 to require certain creditors to obtain 
certifications from institutions of higher education, and for other 
purposes; to the Committee on Banking, Housing, and Urban Affairs.
  Mr. DURBIN. Mr. President, I rise today to reintroduce two pieces of 
legislation: the Know Before You Owe Act and the Fairness for 
Struggling Students Act. These bills will take critical steps toward 
addressing the student debt crisis facing America.
  Every week my office is contacted by young people and their families 
who share with me their horror stories about student debt. Many of them 
are college students or graduates who are getting crushed by student 
loans the size of mortgages. All too often, these young people were 
lured into attending worthless, for-profit colleges that left them with 
worthless diplomas and mountains of debt. It is disgraceful. But it is 
not only young people facing this debt crisis, it is their parents, 
their siblings, even their grandparents who did them a favor by 
cosigning on these loans. They, too, are being held responsible when 
the loans go into default.
  Many of these people contact my office because they don't know where 
to turn. Their debt loan leaves them feeling helpless. They are putting 
off major life decisions such as buying a home or even starting a 
family because of crushing student debt. We can't stand idly by any 
longer and ignore this reality. We have to step up and recognize that 
this student debt bomb is ticking away.
  Student loan debt among college students surpassed $1 trillion last 
year. The New York Fed reports that balances of student loans have now 
exceeded the balances on automobile loans and credit card debt in 
America--student loans. That makes student loans the largest form of 
consumer debt outside of home mortgages.
  Last year, 37 million borrowers held student loan debt. That is more 
than 10 percent of the population of this country. The average balance 
is $24,300. But, remember, that is an average. This is a massive amount 
of debt, and it is having a profound impact on the lives of students 
and their families across America.
  The overall growth in student debt is troubling. The most pressing 
concern is what is known as private student loans. If a student goes to 
college, they could qualify for a government-guaranteed loan with 
dramatically lower interest rates with accommodations based on their 
employment and even some loan forgiveness. Not so when it comes to 
private student loans in most cases. Students who take out Federal 
loans receive affordable interest rates, a lot of protections and 
repayment options. Private student loans are totally different. Private 
student loans often have high variable interest rates, hefty 
origination fees, lack of repayment options, and, unfortunately, 
crushing penalties.
  In 2012 the amount of outstanding private student loans exceeded $150 
billion. Students are being steered into these private loans while they 
are still eligible for the better government loans. Why? Because 
somebody is making more money when they sign up for private student 
loans. As a result, many students are being saddled with debt they 
don't have to be saddled with and sometimes debt they can never repay.
  The Consumer Financial Protection Bureau last year reported that at 
least 850,000 individual private student loans were in default 
amounting to more than $8 billion.
  Let me tell my colleagues about one of those students. I have opened 
on my official Web site a place where those who have student loans and 
want to share their stories can come. Anna Wilcox, who is 31 years old, 
did. She attended the Brooks Institute of Photography, a for-profit 
college owned by the Career Education Corporation.
  Anna Wilcox saw a TV ad one day about this so-called Brooks Institute 
of Photography and decided she would call and inquire. The school 
called her twice a day until she finally enrolled. The recruiter at the 
school--this Career Education Corporation School--told her that a 
Brooks degree would help her make $85,000 a year as a photographer. So 
Anna enrolled, and when she graduated in 2006, she had a debt of about 
$170,000, almost all of it in private student loans.
  Anna was 24 years old with $170,000 in student debt from this for-
profit school. With a variable interest rate that went as high as 18 
percent, her balance just kept growing. Her monthly payments on her 
private student loan now exceed $1,000 a month. Her Federal loans she 
took out as well had low interest rates. She said those payments are 
reasonable, and she can handle them. Her parents decided to help her 
out and cosigned on the loans. Now her parents, in their sixties, are 
on the hook as well. They have to change their life plans because they 
wanted to help their daughter, and now they are stuck with a debt of 
$170,000 for a worthless diploma from a for-profit school.
  Well, Anna did find a job, but the job doesn't pay anywhere near 
$85,000 a year. She just can't keep up with these staggering monthly 
loan payments. She said she would like to file for bankruptcy, clean 
the slate, and start over. She can't borrow money to go to a real 
school. She has wasted her borrowing power on these for-profit schools.
  It doesn't do her any good to want to file for bankruptcy. Private 
student loans are not dischargeable for bankruptcy. If a person signs 
up as a college student for one of these student loans, it is debt that 
will follow that person for a lifetime. There is no way to escape it. 
It is something to think about long and hard when students make that 
decision.
  Anna is very blunt and despondent. She said she made a big mistake 
going to the school. It was a waste. She thought she would get a better 
life by going to college. She didn't realize these for-profit schools 
by and large are a waste of money and cause debt that most students can 
never pay back. She has bad credit now and a mountain of debt to show 
for it.
  So what are we going to do about it? Are we going to say: Well, Anna, 
you should have been a little bit smarter when you were 19 years old 
and sat across the desk from somebody who said: We want you as a 
college student. You made your mistake, girl. That is the way it works 
in America, and now you have to pay the price. Is that the answer? Is 
that the answer when these for-profit schools depend on the Federal 
Government and taxpayers for 85 to 95 percent of all of the revenue 
they take in?
  These for-profit schools, if we took the Federal money we send their 
way--if these for-profit schools were a Federal agency, it would be the 
ninth largest Federal agency in America. That is how much money we are 
pouring into these for-profit schools.
  Let me just put three numbers out for people to reflect on: 12 
percent of the students out of high school go to for-profit schools. We 
know their names. They are students who gather in Washington and come 
to the galleries. They know what I am talking about. Go on the Internet 
and try to escape an ad for a for-profit school: University of Phoenix, 
DeVry, Kaplan. Ring a bell? Well, I can tell my colleagues these are 
the biggies, but there are hundreds of them. Twelve percent of the 
students after high school go to for-profit schools.
  For-profit schools, though, account for 25 percent of all of the 
Federal aid to education. They just soak it up. Students borrow and 
turn it over to the for-profit schools. The student is stuck with the 
debt. The for-profit school may never graduate you, but they have their 
money.
  There is a third number to remember. The first is 12, the second is 
25. The third number is 47. Forty-seven percent of the student loan 
defaults in America are students from for-profit schools, students 
being dragged into these schools that charge way too much for tuition 
and then the student either can't finish the school or gets out of 
school and can't find a job and they are stuck.
  I tell my students back home, if you are not sure, start at a 
community college. It is affordable. It has a wide array of courses to 
be offered to you. You will learn a lot about yourself, you will learn 
a lot about what you want to

[[Page S221]]

do in school, and you will not end up sunk in debt like these for-
profit schools want to do to you.
  We have to do something about Anna Wilcox's plight and many others 
just like her.
  I wish to commend especially one community college in my State, the 
Elgin Community College. I have been visiting that school regularly and 
always come home thinking: This college gets it. They have implemented 
a financial counseling program that goes above and beyond anything I 
would put into law. All of the students at Elgin Community College in 
Elgin, IL, must submit a monthly budget detailing all their costs when 
they are seeking financial aid. The student then has a mandatory, one-
on-one meeting with a counselor to review the loan balance, the 
repayment options, and what happens if they default. This community 
college has implemented a workshop for students who will be graduating 
during the upcoming semester to discuss repayment options and give them 
a complete summary of every loan they have taken out.
  These students are facing debt the likes of which they have never 
seen in their lives. They are motivated by all of the preaching they 
have heard from their parents, like me, saying: Go to school. Get a 
degree. They are ready to sign up because they want to do what they 
think is the right thing. They do not know that the for-profit school 
is worthless, they do not know that the thousands and thousands of 
dollars of debt will never be able to be repaid, and they do not know 
that debt will be with them for a lifetime. So here are some bills I am 
introducing to address it.
  I believe students will benefit more if they have the kind of loan 
counseling we see at the Elgin Community College. I am joining Senator 
Tom Harkin of Iowa, chairman of the HELP Committee, in reintroducing 
the Know Before You Owe Private Student Loan Act of 2013.
  The legislation requires colleges to confirm a student's enrollment 
status, cost of attendance, and estimated Federal financial aid 
assistance before any private student loan can be approved for that 
student. In other words, if you are eligible for the government loan, 
for goodness' sakes, take that first. The private student loan is much 
more expensive, and it is tougher to pay it back. So we want to make 
sure students who are eligible for government loans know that before 
they sign up for the private student loans. Often, students have not 
even applied for Federal aid before they are encouraged by some of 
these schools to apply for private student loans, or students have not 
exhausted their eligibility for Federal aid. Requiring school 
certification would give the school the opportunity to make students 
aware of Federal student aid options and the most affordable options.
  The bill would also require schools to counsel the students about 
their loan options. Schools would be required to inform students about 
the differences between Federal student loans and private student 
loans, and they are stark and dramatic. For students who decide to take 
out private student loans, the bill would require lenders to provide 
them with quarterly up-to-date information about their balance and 
interest accrued. It is not one of these deals where you just keep 
borrowing and borrowing and borrowing, and finally when you are about 
to finish school--or years later--they give you the total, and you look 
at it and say: My goodness, I did not realize I had signed up for all 
of that debt.
  This legislation is supported by a large coalition of educational, 
student, and consumer organizations and has been recommended by the 
Consumer Financial Protection Bureau.
  The other bill I am reintroducing today is the Fairness for 
Struggling Students Act. This bill, cosponsored by Senators Whitehouse, 
Franken, Harkin, and Jack Reed, would restore the Bankruptcy Code's 
pre-2005 treatment of private student loans.
  As I said earlier, since 2005 private student loans have enjoyed a 
privileged status under the Bankruptcy Code. They cannot be discharged 
in bankruptcy except under the most extreme circumstances. Only a few 
other types of debt cannot be discharged in bankruptcy--criminal fines, 
child support, taxes, and alimony. In contrast, nearly all types of 
private, unsecured debt--credit card debt, doctor bills--are 
dischargeable in bankruptcy, but not student loans.
  There was no good reason for Congress to give such preferred 
treatment to these financial institutions that are peddling these 
private student loans. It was a provision--a sweetheart provision--
tucked into a massive bankruptcy reform bill with very little debate 
and even less justification. There is no evidence that private student 
loan borrowers were abusing the bankruptcy system before this law was 
changed. In fact, the private student loan market has been growing--
even before this measure was enacted into law. But the private student 
loan industry got a sweetheart deal out of Congress, and now we are in 
a situation where many students have overwhelming private student loan 
debt, and they cannot repay, and they cannot escape. This is 
devastating for those students and a drag on our overall economy.
  There was an article a few months ago in the New York Times, and it 
talked about a grandmother who was having her Social Security check 
garnished because she had signed on as a cosigner of her 
granddaughter's student loan. Her granddaughter dropped out of college 
and could not pay back the loan, and now we are going after grandma's 
Social Security check. That is how serious this can be.
  A large coalition of student, educational, civil rights, and consumer 
organizations support this bill. I hope we can move forward with 
legislation this year. It is time to restore fairness to our Bankruptcy 
Code when it comes to student debt.
  Let me be clear: When used appropriately, student loans are valuable 
and important. I would not be standing here today if I had not borrowed 
money from the Federal Government to go to college and law school. I 
never could have afforded it otherwise. It was called the National 
Defense Education Act. If I told you the numbers that I borrowed, you 
would realize how old I am. But at the time, it was scary to have that 
much debt coming fresh out of law school. I paid it back just like I 
was supposed to so the next generation could take over. But what I 
faced, the debt I incurred to go to school and law school, does not 
even come close to matching what many students have to borrow in the 
first semester, and that, unfortunately, leads to a debt that some will 
be crushed with for a lifetime. In many instances, student loans help 
Americans get a quality higher education and the job skills they need 
to repay their loans and have a rewarding life and career. But, 
unfortunately, there are far too many Americans who have been steered 
into high-cost private loans that will burden them for life and prevent 
them from fully contributing to our economy.
  It is about time we woke up to the reality of what students--millions 
of students--across America are facing, and their families. We have a 
responsibility to them over and above the profits that are being earned 
by for-profit schools and the financial institutions peddling these 
private student loans with these outrageous interest rates and terms. 
It is time for this Congress to listen to working families and their 
kids all across America to restore transparency, fairness, and common 
sense to private student loans. I urge my colleagues to support these 
bills.
  Mr. President, I ask unanimous consent that the text of the bills be 
printed in the Record.
  There being no objection, the text of the bills was ordered to be 
printed in the Record as follows:

                                 S. 113

       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 ``Know Before You Owe Private 
     Student Loan Act of 2013''.

     SEC. 2. AMENDMENTS TO THE TRUTH IN LENDING ACT.

       (a) In General.--Section 128(e) of the Truth in Lending Act 
     (15 U.S.C. 1638(e)) is amended--
       (1) by striking paragraph (3) and inserting the following:
       ``(3) Institutional certification required.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     before a creditor may issue any funds with respect to an 
     extension of credit described in this subsection, the 
     creditor shall obtain from the relevant institution of higher 
     education where such loan is to be used for a student, such 
     institution's certification of--

[[Page S222]]

       ``(i) the enrollment status of the student;
       ``(ii) the student's cost of attendance at the institution 
     as determined by the institution under part F of title IV of 
     the Higher Education Act of 1965; and
       ``(iii) the difference between--

       ``(I) such cost of attendance; and
       ``(II) the student's estimated financial assistance, 
     including such assistance received under title IV of the 
     Higher Education Act of 1965 and other financial assistance 
     known to the institution, as applicable.

       ``(B) Exception.--Notwithstanding subparagraph (A), a 
     creditor may issue funds with respect to an extension of 
     credit described in this subsection without obtaining from 
     the relevant institution of higher education such 
     institution's certification if such institution fails to 
     provide within 15 business days of the creditor's request for 
     such certification--
       ``(i) the requested certification; or
       ``(ii) notification that the institution has received the 
     request for certification and will need additional time to 
     comply with the certification request.
       ``(C) Loans disbursed without certification.--If a creditor 
     issues funds without obtaining a certification, as described 
     in subparagraph (B), such creditor shall report the issuance 
     of such funds in a manner determined by the Director of the 
     Consumer Financial Protection Bureau.'';
       (2) by redesignating paragraphs (9), (10), and (11) as 
     paragraphs (10), (11), and (12), respectively; and
       (3) by inserting after paragraph (8) the following:
       ``(9) Provision of information.--
       ``(A) Provision of information to students.--
       ``(i) Loan statement.--A creditor that issues any funds 
     with respect to an extension of credit described in this 
     subsection shall send loan statements, where such loan is to 
     be used for a student, to borrowers of such funds not less 
     than once every 3 months during the time that such student is 
     enrolled at an institution of higher education.
       ``(ii) Contents of loan statement.--Each statement 
     described in clause (i) shall--

       ``(I) report the borrower's total remaining debt to the 
     creditor, including accrued but unpaid interest and 
     capitalized interest;
       ``(II) report any debt increases since the last statement; 
     and
       ``(III) list the current interest rate for each loan.

       ``(B) Notification of loans disbursed without 
     certification.--On or before the date a creditor issues any 
     funds with respect to an extension of credit described in 
     this subsection, the creditor shall notify the relevant 
     institution of higher education, in writing, of the amount of 
     the extension of credit and the student on whose behalf 
     credit is extended. The form of such written notification 
     shall be subject to the regulations of the Consumer Financial 
     Protection Bureau.
       ``(C) Annual report.--A creditor that issues funds with 
     respect to an extension of credit described in this 
     subsection shall prepare and submit an annual report to the 
     Consumer Financial Protection Bureau containing the required 
     information about private student loans to be determined by 
     the Consumer Financial Protection Bureau, in consultation 
     with the Secretary of Education.''.
       (b) Definition of Private Education Loan.--Section 
     140(a)(7)(A) of the Truth in Lending Act (15 U.S.C. 
     1650(a)(7)(A)) is amended--
       (1) by redesignating clause (ii) as clause (iii);
       (2) in clause (i), by striking ``and'' after the semicolon; 
     and
       (3) by adding after clause (i) the following:
       ``(ii) is not made, insured, or guaranteed under title VII 
     or title VIII of the Public Health Service Act (42 U.S.C. 292 
     et seq. and 296 et seq.); and''.
       (c) Regulations.--Not later than 365 days after the date of 
     enactment of this Act, the Consumer Financial Protection 
     Bureau shall issue regulations in final form to implement 
     paragraphs (3) and (9) of section 128(e) of the Truth in 
     Lending Act (15 U.S.C. 1638(e)), as amended by subsection 
     (a). Such regulations shall become effective not later than 6 
     months after their date of issuance.

     SEC. 3. AMENDMENT TO THE HIGHER EDUCATION ACT OF 1965.

       (a) Amendment to the Higher Education Act of 1965.--Section 
     487(a) of the Higher Education Act of 1965 (20 U.S.C. 
     1094(a)) is amended by striking paragraph (28) and inserting 
     the following:
       ``(28)(A) The institution shall--
       ``(i) upon the request of a private educational lender, 
     acting in connection with an application initiated by a 
     borrower for a private education loan in accordance with 
     section 128(e)(3) of the Truth in Lending Act, provide 
     certification to such private educational lender--

       ``(I) that the student who initiated the application for 
     the private education loan, or on whose behalf the 
     application was initiated, is enrolled or is scheduled to 
     enroll at the institution;
       ``(II) of such student's cost of attendance at the 
     institution as determined under part F of this title; and
       ``(III) of the difference between--

       ``(aa) the cost of attendance at the institution; and
       ``(bb) the student's estimated financial assistance 
     received under this title and other assistance known to the 
     institution, as applicable; and
       ``(ii) provide the certification described in clause (i), 
     or notify the creditor that the institution has received the 
     request for certification and will need additional time to 
     comply with the certification request--

       ``(I) within 15 business days of receipt of such 
     certification request; and
       ``(II) only after the institution has completed the 
     activities described in subparagraph (B).

       ``(B) The institution shall, upon receipt of a 
     certification request described in subparagraph (A)(i), and 
     prior to providing such certification--
       ``(i) determine whether the student who initiated the 
     application for the private education loan, or on whose 
     behalf the application was initiated, has applied for and 
     exhausted the Federal financial assistance available to such 
     student under this title and inform the student accordingly; 
     and
       ``(ii) provide the borrower whose loan application has 
     prompted the certification request by a private education 
     lender, as described in subparagraph (A)(i), with the 
     following information and disclosures:

       ``(I) The availability of, and the borrower's potential 
     eligibility for, Federal financial assistance under this 
     title, including disclosing the terms, conditions, interest 
     rates, and repayment options and programs of Federal student 
     loans.
       ``(II) The borrower's ability to select a private 
     educational lender of the borrower's choice.
       ``(III) The impact of a proposed private education loan on 
     the borrower's potential eligibility for other financial 
     assistance, including Federal financial assistance under this 
     title.
       ``(IV) The borrower's right to accept or reject a private 
     education loan within the 30-day period following a private 
     educational lender's approval of a borrower's application and 
     about a borrower's 3-day right to cancel period.

       ``(C) For purposes of this paragraph, the terms `private 
     educational lender' and `private education loan' have the 
     meanings given such terms in section 140 of the Truth in 
     Lending Act (15 U.S.C. 1650).''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall take effect on the effective date of the regulations 
     described in section 2(c).

     SEC. 4. REPORT.

       Not later than 24 months after the issuance of regulations 
     under section 2(c), the Director of the Consumer Financial 
     Protection Bureau and the Secretary of Education shall 
     jointly submit to Congress a report on the compliance of 
     institutions of higher education and private educational 
     lenders with section 128(e)(3) of the Truth in Lending Act 
     (15 U.S.C. 1638(e)), as amended by section 2, and section 
     487(a)(28) of the Higher Education Act of 1965 (20 U.S.C. 
     1094(a)), as amended by section 3. Such report shall include 
     information about the degree to which specific institutions 
     utilize certifications in effectively encouraging the 
     exhaustion of Federal student loan eligibility and lowering 
     student private education loan debt.

                                 S. 114

       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 2013''.

     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;''.
                                 ______