Student Loan Discharge Amendment Fails in House
The House recently voted down a provision which would have made it easier to discharge private student loans in bankruptcy. Currently student loans may not be discharged except in cases of undue hardship; the Davis amendment would have allowed discharge of private student loans dischargeable after the first five years of payments. Student loans would still be treated better than most other types of unsecured debt, most of which is dischargeable at any time.
On the House floor, Members asked whether this change would cause student loan interest rates to increase. Rep. Miller of California brought up the marketing of student loans, which in his view are being promoted irresponsibly and have become more like consumer loans, and therefore less worthy of special treatment in bankruptcy.
The big question, of course, is not the fate of this amendment, but whether Congress will revisit the 2005 amendments to the Bankruptcy Code. In 2005, bankruptcy became much more difficult for debtors, and next year’s Congress may wish to make this change and perhaps others in response to the mortgage crisis.
Why would congress want to help people trying to better themselves?
February 26, 2008 7:11 PM | Reply | Permalink
The Davis Amendment was a real opportunity to help some students deal with unreasonable student debt -- rediculous that it failed. The good news, however, is that the Higher Education Act reauthorization bill currently being conferenced has some good provisions that will hopefully mean that fewer students have to mortgage their futures to pursue the college dream. Also, Congress passed -- and Bush actually signed -- the College Cost Reduction and Access Act -- which which is the largest investment in higher education since the GI bill. The new law cuts interest rates on subsidized federal loans in half over the next five years, contains college costs, and makes student loan payments more manageable for borrowers. It also increase the maximum Pell Grant by $1,090 over the next five years and will provide loan forgiveness to a number of graduates who choose to become public servants. Most of its provisions go into effect Oct. 1, 2007.
February 27, 2008 9:31 PM | Reply | Permalink
I know, I know, correlation does not equal causation.
But still...
The costs of college education have increased well ahead of the cost of inflation. With student loans (a) readily available; and (b) NOT DISCHARGEABLE ('cept in certain narrow circumstances); what incentive is there for universities and other institutions to hold costs down?
Again, I'm not an expert in this field (but have become awfully suspicious of wall street's arguments in the past four years) and it seems like that amendment or something like it is a good idea.
March 18, 2008 2:20 PM | Reply | Permalink