August 24, 2014

Senate Banking eyes student loan debt

Aug. 4, 2014 – The Senate Banking Committee Thursday held a hearing on the effect of rising student loan debt on borrowers and the broader economy, during which lawmakers particularly focused on how to handle bankruptcy and other obstacles for borrowers.

The committee heard testimony from representatives of the Center for American Progress, the U.S. Public Interest Research Group, the Sound Dakota Association of Student Financial Aid Administrators and the Consumer Bankers Association.

Democratic lawmakers emphasized the need for private student lenders to offer flexible repayment options to borrowers experiencing hardship, and for private student debt to be dischargeable in the case of bankruptcy.

In his opening remarks, Chairman Tim Johnson, D-S.D., said, "While the level of student loan debt is significant, equally significant are the level of delinquencies and the options for borrowers in repayment. Recent data shows that nearly one-third of borrowers are delinquent and borrowers are entering delinquency faster than before the financial crisis. The CFPB has found that borrowers are unable to obtain affordable repayment options and have difficulty working with student loan servicers to correct payment errors."

Lawmakers also cited the website "Know Before You Owe," a CFPB initiative to create a financial aid shopping sheet to allow students to see what grants and loans they might qualify for, and to more easily compare their options. More than 2,000 colleges and universities have adopted the fact sheet.

NAFCU, which is monitoring the student loan debate, maintains that credit unions serve as the gold standard for student loan servicing. The association remains opposed to any move that would allow student loans to be discharged through the bankruptcy process.