Students who take out loans from private lenders to finance their education should have the same right to discharge their debt in bankruptcy that other borrowers enjoy, Illinois Senator Dick Durbin said today.
“While the overall growth in student indebtedness is troubling, the most pressing concern is private student loans,” Durbin, the No. 2 Senate Democrat, said in prepared remarks at a Senate judiciary subcommittee hearing. “These private student loans are a far riskier way to pay for an education than federal loans.”
Outstanding student-loan debt reached an estimated $867 billion in the fourth quarter, and is greater than total U.S. credit-card debt. The student debt includes private loans, which don’t offer options as some government-backed loans when borrowers become financially distressed, including income-based repayment. Durbin introduced a bill in May to eliminate a 2005 provision that made privately issued student loans nondischargable in bankruptcy.
Five years after graduating from Harrington College of Design in Chicago, Danielle Jokela has yet to find a job as a designer and struggles to repay more than $98,000 in student loans.
“I’m asking you to create legislation that will empower us to overcome this burden, and prevent future students from falling into the same trap,” Jokela said in prepared testimony for the hearing. She has a monthly debt payment of about $830, about 28 percent of her current income.
Harrington is operated by for-profit college company Career Education Corp.
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