Dear NACBA Member,
I am writing to bring to your attention a report released today by the Consumer Financial Protection Bureau (CFPB) and U.S. Department of Education which sheds much-needed light on the private student loan market and the urgent need for reforms. The congressionally mandated report, which includes recommendations for Congress, found that private loans make up $150 billion of the more than $1 trillion in outstanding student loan debt.
Among the recommendations to Congress: Revisit the harsh treatment of private loans in bankruptcy. The report finds that since adoption of the Bankruptcy Act of 2005, which made private student loans nondischargeable in bankruptcy, there has been rapid growth in questionable lending practices, compounding the risk to student borrowers. The report also found little to no evidence that restricting bankruptcy rights improved either loan prices or access to credit. The CFPB and Education Department both recommend in the report that Congress revisit this unfair restriction of bankruptcy relief for private student loans.
As you know, NACBA launched a public campaign in February calling attention to the urgent need to restore bankruptcy protection for the trillion dollar student loan “debt bomb.” NACBA’s report and survey has received widespread media attention and has resulted in more than 750 print and electronic media pick-ups. Although our focus is on restoring bankruptcy protection for private and federal student loans, our allies on Capitol Hill have advised us that it is more prudent to focus on private loans at this time.
NACBA’s field team has been busy in recent months asking NACBA members to write to their Senators urging support for a pending bill to restore bankruptcy protection for private student loans, and this also will be the focus of August recess meetings. If you have not already signed up to participate in this effort, please contact Angie or Zach.
This endorsement from the Obama Administration for the changes NACBA is seeking, should prove to be helpful to our efforts.
NACBA Legislative Director