Submitted by AM (not verified) on December 5, 2008 - 2:56pm.
Senator Durbin seems in the past to have been an advocate of including private student loans in bankruptcy. But I have not seen him address this issue lately. Instead, I found this letter to Secretary Paulson on Sen. Durbin's website. Is it just me, or does it seem strange that a United States Senator has to politely ask for Mr. Paulson's consideration of Sen. Durbin's ideas? Shouldn't the senators have been in the driver's seat?
In case you missed it, here's the letter. This is the time for Sen. Durbin to reintroduce his bill that failed last time, to allow private student loans to be discharged in bankruptcy. As has been pointed out many times, homeowner's can leave their keys on the table and walk away. Student debt is for life, and private student debt will still be around in the hereafter.
December 3, 2008
The Honorable Henry M. Paulson, Jr.
Secretary
U.S. Department of the Treasury
1500 Pennsylvania Ave. NW
Washington, DC, 20220
Dear Secretary Paulson:
I am writing to urge caution as the Department of Treasury moves forward with its plan to use Troubled Asset Relief Program funding to stabilize for-profit lenders of private, non-federal student loans and to recommend that consumer protections be incorporated into the plan.
I have serious concerns about the ethics and practices of lenders who offer private, non-federal loans to students.
* With no cap on interest rates, lenders charge high, variable rates on private student loans. As a result, lenders have enjoyed far higher profit margins on private student loans than on federal student loans.
* Direct-to-consumer private lenders skirt financial aid offices by marketing loans directly to students, often without informing students of the availability of lower-cost federal student loans.
* A recent report by Iowa’s attorney general revealed misdeeds by an Iowa lender that aggresively steered students to expensive private student loans.
* A proliferation of unlicensed, unaccredited trade schools have partnered with lenders to provide high-cost private loans to at-risk students at those schools.
* Lenders successfully lobbied for a provision in the 2005 bankruptcy bill that rendered private student loans almost impossible to discharge in bankruptcy.
These practices combined with the exponential growth of the private student loan market over the past decade have resulted in trouble for students. Too many borrowers now find themselves overwhelmed by high-interest private student loans with no hope for relief.
Using taxpayer dollars to aid an industry that has been detrimental to so many students is very troubling. At a minimum, the Treasury should require that any receipt of taxpayer dollars be contingent on the lenders’ agreement to increase consumer protections for private student loan borrowers. Private lenders that receive federal funds should be required to cap interest rates, offer income-contingent and income-based repayment options, and allow private loan borrowers to renegotiate more reasonable terms for their loan if they fall on hard times.
Thank you for your consideration of this request.
Sincerely,
Richard J. Durbin
United States Senator
Sen. Durbin's Bankruptcy Bill
Senator Durbin seems in the past to have been an advocate of including private student loans in bankruptcy. But I have not seen him address this issue lately. Instead, I found this letter to Secretary Paulson on Sen. Durbin's website. Is it just me, or does it seem strange that a United States Senator has to politely ask for Mr. Paulson's consideration of Sen. Durbin's ideas? Shouldn't the senators have been in the driver's seat?
In case you missed it, here's the letter. This is the time for Sen. Durbin to reintroduce his bill that failed last time, to allow private student loans to be discharged in bankruptcy. As has been pointed out many times, homeowner's can leave their keys on the table and walk away. Student debt is for life, and private student debt will still be around in the hereafter.
December 3, 2008
The Honorable Henry M. Paulson, Jr.
Secretary
U.S. Department of the Treasury
1500 Pennsylvania Ave. NW
Washington, DC, 20220
Dear Secretary Paulson:
I am writing to urge caution as the Department of Treasury moves forward with its plan to use Troubled Asset Relief Program funding to stabilize for-profit lenders of private, non-federal student loans and to recommend that consumer protections be incorporated into the plan.
I have serious concerns about the ethics and practices of lenders who offer private, non-federal loans to students.
* With no cap on interest rates, lenders charge high, variable rates on private student loans. As a result, lenders have enjoyed far higher profit margins on private student loans than on federal student loans.
* Direct-to-consumer private lenders skirt financial aid offices by marketing loans directly to students, often without informing students of the availability of lower-cost federal student loans.
* A recent report by Iowa’s attorney general revealed misdeeds by an Iowa lender that aggresively steered students to expensive private student loans.
* A proliferation of unlicensed, unaccredited trade schools have partnered with lenders to provide high-cost private loans to at-risk students at those schools.
* Lenders successfully lobbied for a provision in the 2005 bankruptcy bill that rendered private student loans almost impossible to discharge in bankruptcy.
These practices combined with the exponential growth of the private student loan market over the past decade have resulted in trouble for students. Too many borrowers now find themselves overwhelmed by high-interest private student loans with no hope for relief.
Using taxpayer dollars to aid an industry that has been detrimental to so many students is very troubling. At a minimum, the Treasury should require that any receipt of taxpayer dollars be contingent on the lenders’ agreement to increase consumer protections for private student loan borrowers. Private lenders that receive federal funds should be required to cap interest rates, offer income-contingent and income-based repayment options, and allow private loan borrowers to renegotiate more reasonable terms for their loan if they fall on hard times.
Thank you for your consideration of this request.
Sincerely,
Richard J. Durbin
United States Senator