Proposed Legislation to Deal with the Growing Problem of Student Loan Debt
A Senate judiciary subcommittee is looking into the nation's growing student loan debt problem. Government data revealed that there was a 15 percent loan default rate at private institutions in 2009. Senate Majority Whip Richard J. Durbin convened the judiciary subcommittee and sponsored legislation to allow individuals to discharge private student loan debts through bankruptcy. A significant change that the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) introduced was that debtors could no longer discharge private student loans through bankruptcy, neither in Chapter 7 nor Chapter 13.
The Washington Post reported that Deanne Loonin, a National Consumer Law Center lawyer, works with consumers who are in their 80s and are still paying student loans. Some of them have the government garnishing their Social Security checks to collect student loan debts. It is her opinion that proposed legislation also should address government student loans, making all student loans dischargeable. Unlike other types of loans, student loans have no statute of limitations. People can be subject to collection until their dying day.
Durbin's plan is to attach his proposed changes to a bill dealing with student loan interest rates. He believes it has a better chance of passing through Congress as an attachment.
Stafford loans, which are federally subsidized loans, are about to have their period of five-year reduced interest rates expire this July. Unless a bill introduced by Senator Jack Reed and Representative Joe Courtney passes, which keep interest rates level, the rate will increase from 3.4 to 6.8 percent.