By: Kristy Hernandez
A report released today by the Consumer Financial Protection Bureau (CFPB) and U.S. Department of Education sheds much-needed light on the private student loan market and the urgent need for reforms. The congressionally mandated report, which includes recommendations for Congress, found that private loans make up $150 billion of the more than $1 trillion in outstanding student loan debt.
Among the recommendations to Congress: Revisit the harsh treatment of private loans in bankruptcy. The report finds that since adoption of the Bankruptcy Act of 2005, which made private student loans nondischargeable in bankruptcy, there has been rapid growth in questionable lending practices, compounding the risk to student borrowers. The report also found little to no evidence that restricting bankruptcy rights improved either loan prices or access to credit. The CFPB and Education Department both recommend in the report that Congress revisit this unfair restriction of bankruptcy relief for private student loans.
I urge clients interested in this issue to write to their Senators urging support for a pending bill to restore bankruptcy protection for private student loans. Your help can make a difference!