Statements On Introduced Bills And Joint Resolutions

Floor Speech

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By Mr. DURBIN (for himself, Mr. FRANKEN, and Mr. WHITEHOUSE):

S. 3219. A bill to amend title 11, United States Code, with respect to certain exceptions to discharge in bankruptcy; to the Committee on the Judiciary.

Mr. DURBIN. Mr. President, three weeks ago, the Senate passed significant student loan reform. It turns out that for the past several decades, we have been paying banks $6 billion per year to be the middle men in our student loan system. The bill we passed puts a stop to that. Instead of lining the pockets of bankers like Al Lord at Sallie Mae, we will originate all Federal student loans through the Direct Loan Program and we will invest the savings, $68 billion, in education priorities. We put $36 billion into Pell Grants to increase the grant size and tie it to inflation. We also capped monthly student loan payments at 10 percent of discretionary income to help ease repayment for students in public service careers. We invested in historically black colleges and universities, minority serving institutions, community colleges, and state-based college access programs that help students succeed in college. These reforms are essential in helping students afford a college education.

Today, along with Senator FRANKEN and Senator WHITEHOUSE, I am introducing a bill that will take an additional step in restoring fairness in student lending by treating privately issued student loans in bankruptcy the same way other types of private debt are treated. Our bill, the Fairness for Struggling Students Act, will allow borrowers of private student loans to discharge those loans in bankruptcy. Representatives COHEN and DAVIS are introducing a similar bill in the House.

Federally issued or guaranteed student loans have been protected during personal bankruptcy since 1978. This is a good law that protects Federal investments in higher education. In 2005, a provision was added to law to protect the investments of private lenders that extend private credit--not federally guaranteed student loans--to students. With the 2005 protections in place, there is virtually no risk to lenders making high-cost private loans to students at schools with low graduation rates and even lower job placement rates. So the industry has boomed over the past decade. Private student loan volume last year was $11 billion.

But there is plenty of risk for student borrowers. The interest rates and fees on private loans can be as onerous as credit cards. There are reports of private loans with variable interest rates reaching 18 percent. Unlike Federal student loans, the Government does not impose loan limits on private loans and does not regulate the terms or cost of these loans. Some students who take out these loans find themselves trapped under an enormous amount of debt that they cannot escape.

Today, I am pleased to introduce a bill that will give students who find themselves in dire financial straits a chance at a new beginning. My bill restores the bankruptcy law, as it pertains to private student loans, back to where it was before the law was amended in 2005. Under this legislation, privately issued student loans will once again be dischargeable in bankruptcy. My bill also clarifies that the remaining protections are specific to loans that were issued by or are guaranteed by State and Federal Government.

Three weeks ago we ended the ability of lenders and banks to make risk-free federal loans to students. It is time to also end the risk-free nature of private student loans and restore fairness for student borrowers.

Mr. President, I ask unanimous consent that the text of the bill be printed in the RECORD.

There being no objection, the text of the bill was ordered to be printed in the RECORD

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