On March 20, your Student Loan Ranger attended "The Looming Student Debt Crisis: Providing Fairness For Struggling Students," a Judiciary Subcommittee on Administrative Oversight and the Courts hearing. (You can watch a video of the hearing, and we'll give a prize to the first person who sends us a frame showing the Student Loan Ranger in the audience!)
Obviously, that is right up our alley. And the fact that Sen. Dick Durbin (D-Ill.) convened the hearing, even though he's not a member of the Subcommittee, piqued our interest, because Durbin is the sponsor of the Fairness for Struggling Students Act of 2011, which would restore the ability to discharge commercial student loans in bankruptcy proceedings.
Not surprisingly, the need to provide bankruptcy protections for borrowers of private student loans was a focus of the hearing. There was moving testimony from Danielle Jokela, who has struggled to find work in her chosen field and to pay off her student loans after graduating from Harrington College of Design. Six months after her graduation in 2007, her initial student loan debt of nearly $79,000 had grown to more than $100,000 due to interest and fees. Twenty-five years (assuming the interest rates on her non-fixed interest rate private loans don't go up) and approximately $211,000 from now, Jokela will finally pay off her loans.
[Find out how to kick off student loan repayments.]
Jokela's story is a graphic illustration of the Student Loan Ranger's ongoing advice to be aware of the benefits of federal loans. Although she borrowed nearly the same amounts in federal and private loans ($37,625 in federal loans and $40,925 in private loans), Jokela will repay only $56,000 for those federal loans and nearly $155,000 for her private loans in those 25 years. We didn't get to ask her, but she might be taking advantage of Income-Based Repayment for her federal loans.
In addition, Attorneys General Lisa Madigan from Illinois and Jack Conway from Kentucky described the fraud cases they are bringing against proprietary schools and private lenders. Madigan testified in favor of the Fairness for Struggling Students Act of 2011 and discussed the importance of creating an adequate safety net for borrowers that have exhausted all options but are still crippled by student loan debt.
Highlights from Conway's testimony included his concern regarding borrowers being manipulated by private student loan market lenders. He called for providing private student loan borrowers with the consumer protections that are available to federal student loan borrowers.
[Discover resources for federal and private loan borrowers.]
Last but not least, attorney Deanne Loonin from the National Consumer Law Center stressed that not allowing student loan borrowers to declare bankruptcy is arbitrary and unfair. According to Loonin, the "harsh treatment of students in the bankruptcy system was built on the false premise that students were more likely to 'abuse' the bankruptcy system" but "there is no evidence and has never been any evidence to support this assumption." For more information, you can read her written testimony.
One other interesting side note: In the hearing, Senator Durbin discussed how the draconian change not allowing private student loans to be dischargeable in bankruptcy was mysteriously "slipped in" to the Bankruptcy Abuse Prevention and Consumer Protection Act in 2005.
From a broader perspective, the hearing further evidenced how the student debt issue continues to gain traction as a national issue and the extent to which people are now looking for responsible and serious solutions. (Congressman Clarke's Student Loan Forgiveness Act of 2012, which we talked about last week, is another example.)
It's important to remember, though, that members of Congress are responding to the concerns of their constituents, so, if this is something you're passionate about, let your voice be heard. The Student Loan Ranger urges you to thank the members of the Subcommittee and Senator Durbin for convening the hearing. If you are concerned about educational debt, contact your Representative and Senators to share your stories and let them know what you think of the Fairness for Struggling Students Act of 2011 and the Student Loan Forgiveness Act of 2012.
Isaac Bowers is a senior program manager in the Communications and Outreach unit, responsible for Equal Justice Works' educational debt relief initiatives. An expert on educational debt relief, Bowers conducts monthly webinars for a wide range of audiences; advises employers, law schools, and professional organizations; and works with Congress and the Department of Education on federal legislation and regulations. Prior to joining Equal Justice Works, he was a fellow at Shute, Mihaly & Weinberger LLP in San Francisco. He received his J.D. from New York University School of Law.