[Congressional Record (Bound Edition), Volume 161 (2015), Part 4]
[Extensions of Remarks]
[Pages 4746-4747]
[From the U.S. Government Publishing Office, www.gpo.gov]




      INTRODUCTION OF PRIVATE STUDENT LOAN BANKRUPTCY FAIRNESS ACT

                                 ______
                                 

                            HON. STEVE COHEN

                              of tennessee

                    in the house of representatives

                        Thursday, March 26, 2015

  Mr. COHEN. Mr. Speaker, I rise today in support of the Private 
Student Loan Bankruptcy Fairness Act, a bill I introduced earlier today 
with my colleagues Danny Davis and Eric Swalwell which would restore 
fairness in student lending by treating privately issued student loans 
in bankruptcy the same as other types of private debt.
  It is sad enough that our children are increasingly burdened by a 
crushing weight of student debt. But the fact that students under the 
weight of this debt are treated so unfairly in bankruptcy is 
unconscionable.
  Before 2005, private student loans issued by for-profit lenders were 
treated in bankruptcy like most other unsecured consumer debt, such as 
credit card debt. Our bill will ensure that privately issued student 
loans will once again be treated like other consumer debt and be 
dischargeable in bankruptcy.
  Private student loans have much in common with credit cards and 
subprime mortgages. For example, private student loans often have 
onerous interest rates with no caps and can include exorbitant fees and 
hidden charges. In addition, many lenders have used aggressive 
marketing and high-pressure sales tactics to target particularly 
vulnerable people, namely, young men and women without financial 
experience, and older Americans seeking to re-start their careers in 
these financially difficult times by pursuing higher education and 
training.
  The harmful features of many private student loans have resulted in a 
substantial rise in the number of delinquencies.
  To make matters worse, private student loans lack the critical 
consumer protections that come with federal student loans. For 
instance, private lenders are not required to--and typically do not--
provide any of the deferments, income-based repayment plans, 
cancellation rights, or loan forgiveness programs that are available to 
federal student loan borrowers.
  A hallmark of our Nation's bankruptcy law is to give an honest but 
unfortunate debtor a chance to obtain meaningful relief. To that end, 
the law exempts very few types of debt from elimination through the 
bankruptcy process, and only for principled policy reasons, such as 
debts for child support, taxes, criminal fines and intentional injury.
  Ten years ago, however, Congress changed the bankruptcy law without 
any substantive analysis so that student loans made by private, for-
profit lenders became very difficult to discharge in bankruptcy.
  Currently, the Bankruptcy Code prohibits the discharge of private 
educational debt unless the debtor, in addition to meeting the already 
stringent requirements for personal bankruptcy, proves that repayment 
would impose

[[Page 4747]]

an, ``undue hardship,'' on the debtor and the debtor's dependents. In 
practice, however, it's hard for a debtor to ever successfully meet 
this standard.
  The current bankruptcy law unjustly punishes hardworking Americans 
who are simply trying to improve their lives by pursuing a higher 
education and became victims of predatory private student loan lenders.
  The Consumer Financial Protection Bureau warns that private student 
loan debt currently exceeds $150 billion, which could undermine the 
future prospects of millions of Americans.
  We can do better.
  I urge my colleagues to support the Private Student Loan Bankruptcy 
Fairness Act.

                          ____________________