Dodd Bill Proposes to Make Private Loans Dischargeable in Bankruptcy

Democratic presidential hopeful Sen. Chris Dodd (D-CT) announced last week that he plans to introduce legislation that would allow private student loan borrowers who have taken on unmanageable levels of debt to discharge their loans through bankruptcy. The provision is part of a broader bankruptcy reform bill that Dodd, the chairman of the Senate Banking Committee, is championing that seeks to reverse some aspects of the infamous bankruptcy legislation that Congress approved in 2005. "Our bankruptcy laws should not punish those these vulnerable members of our society, but instead help them to get back on their feet while protecting them and their families from added suffering at the hands of creditors," Dodd said in a statement on his Web site. All student loans, including private ones, are currently non-dischargeable for individuals entering bankruptcy proceedings — an issue that is not addressed in legislation Congress is currently considering that would reauthorize the Higher Education Act. The student loan industry has resisted attempts to make private student loans dischargeable, saying that doing so would make lenders reluctant to make loans to low-income students. However, a recent study by a well respected financial aid expert raised questions about those claims.

New Report Details Roadblocks to College Access in CA Community Colleges

Despite being some of the cheapest two-year institutions in the country, California’s community colleges still have trouble providing sufficent amounts of financial aid to the lowest-income students, according to a report released on Thursday by the Institute for College Access and Success. The report, "Green Lights and Red Tape," surveyed 21 institutions in the California Community College system and found a wide disparity in students’ access to financial aid. A major reason for the difference has to do with the financial aid office itself. For example, the report found that aid administrators at some schools disburse aid early so that students can use the money to cover textbook costs, translate materials into Spanish, and work with families to make sure they understood the aid process. But the report found that other schools do not make their hours widely available, and do not provide enough adequate counseling to help students through the aid application process. The report also argues that these schools are not as affordable as they seem. While tuition and fees are extremely low, a typical community college student spends up to $15,000 a year on housing, transportation, and books. While financial aid could help offset some of these costs, the report found that just 34 percent of these students apply for financial aid each year— 11 percentage points below the national average.

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