Return Full, Free, and Fair Bankruptcy Protections to Student Loans

Dear Members of Congress,

Bankruptcy protections should never have been removed from any student loans in this nation.  There was never any basis for this Congressional action against the citizenry, and that these removals have been allowed to persist, and fester for so many years is strong evidence of the vast corruptive powers that the financial industry has over our elected officials. This is most evident when observing the repeated failure of legislation like S.114 to be passed into law.

We hope and believe that at long last, the current legislation will be successfully passed. However, there are 2 points that must be accommodated if the current legislation is to be meaningful.

1. No Repayment Requirement

It is wrong to require a severely distressed borrower to find a way to make payments on their private loans for many more years before being afforded the same kinds of bankruptcy protections that exist for every other type of loan. This requirement was not in place pre-2005, and thus has no rational reason for being in the forthcoming legislation.

There is a so-called "middle ground" framed into this debate that would consist of a compromise waiting period, as opposed to a repayment period, but we do not see any reason to cede further ground relative to what was taken away in 2005 and before. I hope you will agree .

2. No Exemption for Non-Profit Private Lenders

There should be no distinction made between for-profit, and non-profit lending participants for these loans with respect to dischargeability. To allow non-dischargeability when a non-profit makes, insures, or otherwise participates in the loan only provides a loophole that can and will be exploited to maintain non-dischargeability whenever possible.

In general, we believe it is very clear at this point that removing bankruptcy protections from both private and federal student loans has led to predatory lending behavior, has enabled unchecked inflation in the cost of college, has led to intolerably poor oversight in the case of federal loans, and caused a plethora of other negative consequences that have far outweighed any short term financial benefits to the lending side of the system. The harm this has done to the citizenry has been incalculable. Therefore, we believe that bankruptcy protections must be returned to all student loans as quickly as possible. The current legislation is an important start, however, and so we look forward to its quick passage.