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U.S. House Adopts Cohen Amendment to Help Students Understand Risks of High-Interest Private Student Loans

July 24, 2014



Contact: Ben Gash Garmisa 202.225.3265

July 24, 2014

U.S. House Adopts Cohen Amendment to Help Students Understand Risks of High-Interest Private Student Loans

[WASHINGTON, DC] - The U.S. House of Representatives today approved Congressman Cohen's amendment to H.R. 4984, the Empowering Students Through Enhanced Counseling Act, which would ensure that student loan borrowers are informed of and adequately understand the risks associated with their loans, including those issued by private lenders with excessively high interest rates and fees. Because of an unjustifiable change to the bankruptcy code made in 2005, student loans from private lenders are no longer treated the same as other types of private debt in bankruptcy proceedings, meaning students can be saddled for life with mountains of fees and loan debt that they have no hope of ever paying off. Video of Congressman Cohen speaking in support of his amendment on the House Floor is available at: http://bit.ly/1pMM2fV.

"Most people assume that their student loans can be discharged along with their other consumer debts during bankruptcy proceedings," said Congressman Cohen. "But under current law, a borrower must show that continuing to pay back their loans would impose an 'undue hardship' on them and their dependents--a standard that in practice is nearly insurmountable. Before taking on the significant responsibility of student debt, students should be aware that, even if their financial situation becomes so desperate that they are forced to declare bankruptcy, their federal and private student loans may not be dischargeable and could follow them for life."

The Empowering Students Through Enhanced Counseling Act, provides critical disclosures to students so that they understand their rights and responsibilities when it comes to student loans. Congressman Cohen's amendment simply adds to the list of disclosures included in the bill an explanation of how federal and private student loans are treated in bankruptcy. This amendment is another of the Congressman's efforts to support students, make college more affordable and ensure that young adults and their families understand their financial options and obligations. He is also the lead sponsor of the Private Student Loan Bankruptcy Fairness Act of 2013 with Congressman Danny Davis (IL-07), which aims to restore fairness in student lending by dismantling the 2005 bankruptcy code changes and once again treating privately issued student loans the same as other types of private debt in bankruptcy.

The intense difficulty that students and student loan borrowers may face when seeking "undue hardship" bankruptcy relief was starkly outlined in a New York Times report published earlier this year. Following that report, Congressman Cohen joined U.S. Senators Dick Durbin (D-IL), Jack Reed (D-RI) and Elizabeth Warren (D-MA) with U.S. Representatives John Conyers (D-MI), Elijah Cummings (D-MD), and Hank Johnson (D-GA) in sending a letter urging the U.S. Department of Education to bring more fairness to students by establishing clear standards of eligibility for "undue hardship" discharge that would ensure consistency in the manner in which the Department of Education's contractors handle undue hardship claims.


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Source: Congressional Documents & Publications


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