NAICU Washington Update

Durbin Pushes Bankruptcy Relief for Private Student Loans

March 23, 2012

Senate Majority Whip Richard Durbin (D-IL) held a Senate judiciary subcommittee hearing on March 20 to consider changing the law that prohibits private student loans from being discharged through bankruptcy. While federal student loans have been restricted from discharge for more than 20 years, private loans have been excluded only since 2005.

Lawmakers are focused on the rise in student debt and increases in defaults and delinquencies. A recent report from the Federal Reserve Bank of New York puts outstanding student loan debt at $870 billion, while new data from the Consumer Financial Protection Bureau places it at more than $1 trillion.

Durbin, with the support of several other congressional Democrats, introduced legislation in May 2011 to make private student loans dischargeable through bankruptcy. Consumer advocates are supportive of the bill. However, one witness at the March 20 hearing said the legislation could have the effect of making private loans less available and more expensive.

MORE News from NAICU