We have all heard about the pending legislation to increase student loan interest rates on new student loans, however, there is an even more important bill pending in Congress which may actually help people with their student loan debt.
The bill is the Fairness for Struggling Students Act of 2013, Senate Bill 114, and it will allow private student loans to be discharged in bankruptcy. Currently, the bankruptcy code excludes both private and government student loans from discharge in bankruptcy except in very rare circumstances. Private student loans are those student loans which are credit based, have a market based interest rate which is not government regulated and are generally considered the sub-prime loans of the college world.
A 2012 Consumer Protection Bureau report found that although private student loans make up about 7% of the student loans originated between 2011 and 2012, however 42% of undergraduates at for-profit colleges used a private student loan, compared to just 14% of undergraduates overall.
Senator Jeff Sessions will hear this bill when it comes before the Senate Judiciary Committee. This week fellow bankruptcy attorney and NACBA member Amy Tanner and I met with a representative from Senator Sessions office who seemed genuinely surprised when we explained the escalating problem with student loans. Senator Sessions needs to hear from you if you have a private student loan even if you would never even consider bankruptcy. Here are the main reasons Senator Sessions needs to hear from you:
1. Citizens are just as important as businesses – The Senator needs to understand that Alabama citizens are struggling to make ends meet in this economy. The Senator is pro-business, however, he needs to understand that individuals drive small businesses and no one is starting a business when they are living paycheck to paycheck.
2. Private student lenders are some of the harshest debt collectors – Tell the Senator your experience with harsh student loan collectors.
3. Private student loans that fund for-profit online universities should be treated just like a credit card. If bankruptcy protection is extended to include private student loans, the lenders will be more willing to work with students to set up favorable payments arrangements.
Call Senator Sessions office today and let him know your student loan experience. I am also including Senator Shelby’s contact information as well.
Senator Jeff Sessions — (202) 224-4124
Senator Richard Shelby — (202) 224-5744