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[Extensions of Remarks]
[Pages E110-E111]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
INTRODUCTION OF PRIVATE STUDENT LOAN BANKRUPTCY FAIRNESS ACT
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HON. STEVE COHEN
of tennessee
in the house of representatives
Wednesday, January 30, 2019
Mr. COHEN. Madam 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. This bill would
provide critical relief to Americans in severe financial distress who
are struggling with overwhelming private student loan debt.
Before 2005, private student loans issued by for-profit lenders were
treated in bankruptcy like most other unsecured consumer debt,
[[Page E111]]
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 by
pursuing higher education and training.
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.
In 2005, 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 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.
We can do better.
I urge my colleagues to support the Private Student Loan Bankruptcy
Fairness Act and restore the fair treatment of private student loan
borrowers in bankruptcy.
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