Durbin: President's Student Aid Bill Of Rights Will Better Protect Student Borrowers But Is No Substitute For Debt Relief
Senator says interest rate refinancing and bankruptcy relief needed - will introduce legislation to treat private student loans in bankruptcy the same as other types of private debt
[WASHINGTON, D.C.] – U.S. Senator Dick Durbin (D-IL), author of the Student Loan Borrower’s Bill of Rights, today applauded President Obama’s decision to provide additional protections to both federal and private student loan borrowers, but said that work remains to bring immediate relief to millions of struggling borrowers. Today’s announcement of a Student Aid Bill of Rights will simplify how students interact with student loan servicers. It incorporates many improvements from Durbin’s own Student Loan Borrower’s Bill of Rights including improved notifications to students when their loans are transferred from one servicer to another, standard application of loan payments, and timely resolution of complaints and errors. More information about Durbin’s legislation, which was introduced last year, is available here.
“Today’s announcement is a clear indication of President Obama’s commitment to student borrowers – it is a commitment that we share. I commend the President’s action, but that doesn’t excuse Congress from addressing our national student debt crisis. More must be done to help the nearly 40 million Americans holding some $1.2 trillion in student loan debt. Common-sense reforms like allowing students to refinance their federal student loan interest rates and restoring bankruptcy protections to private student borrowers are steps only Congress can take. I hope my Republican colleagues will join in a bipartisan effort to address this important issue.”
Durbin has long advocated for increased protections for student borrowers and he has worked to build broad support in the Senate for legislative action to reduce new student loan debt and make it easier for millions of working families to manage the student loan debt they already have.
This week, Durbin plans to introduce his Fairness for Struggling Students Act which aims to restore fairness in student lending by treating privately issued student loans in bankruptcy the same as other types of private debt. Durbin’s Fairness for Struggling Students Act would restore the bankruptcy law, as it pertains to private student loans, to the language that was in place before 2005 so that privately issued student loans will once again be dischargeable in bankruptcy like nearly all other forms of private debt. Since 1978, government issued or guaranteed student loans have been treated as nondischargeable during bankruptcy in order to safeguard federal investments in higher education. In 2005, the law was unjustifiably changed to give private student loans the same privileged bankruptcy treatment as government loans, even though private student loans have vastly different terms and fewer consumer protections.
In addition, nine months ago, Durbin led a letter urging the Department of Education to establish clear standards for when Department contractors should contest claims of “undue hardship” by student borrowers. In the letter – signed by U.S. Senators Jack Reed (D-RI) and Elizabeth Warren (D-MA) and U.S. Representatives John Conyers (D-MI), Elijah Cummings (D-MD), Steve Cohen (D-TN), and Hank Johnson (D-GA) – the members of Congress argued that such guidance would bring consistency to the manner in which the Department of Education’s contractors handle undue hardship claims and further enable the Department of Education to focus student loan collection efforts on cases where there is a more realistic opportunity for loan recovery instead of clear cases where borrowers are simply unable to repay their loans because of disability or other circumstances.