WASHINGTON (3/28/12)--Student loan debt will be one of the top topics at today's Senate Appropriations subcommittee on financial services and general government hearing, which will feature testimony from Treasury Secretary Tim Geithner.
The hearing is second in roughly a week to feature the topic of student lending. Sen. Richard Durbin (D-Ill.), who heads the subcommittee, last spring introduced legislation that would treat privately issued student loans the same as other privately issued debt in bankruptcy proceedings. The bill, known as the Fairness for Struggling Students Act (S. 1102), "would help address the looming student debt crisis by restoring a pre-2005 provision in the bankruptcy code allowing for discharge of privately-issued student loans – like other forms of private debt, including credit cards--in bankruptcy," according to a Durbin release.
Consumer Financial Protection Bureau (CFPB) student loan ombudsman Rohit Chopra last week said that combined national student loan debt hit the trillion dollar mark several months ago, and noted that students borrowed $117 billion in federal student loans in 2011. Students continue to borrow private student loans, which lack the income-based repayment and deferment options of federal student loans, he added, saying that "if current trends continue, there will be consequences not just for young people, but for all of us." He said one consequence could be a slow housing market recovery.
The CFPB says it is tackling the student debt problem from a number of fronts, such as working with the U.S. Department of Education and launching the "Know Before You Owe" project to help borrowers, including student borrowers, understand debt implications.
The agency has also asked credit unions and other financial institutions, students, the higher education community, and others in the student loan industry to provide information on the role of schools in the private student loan marketplace, student loan underwriting criteria, repayment terms and behavior, loan servicing and loan modification, and financial education and default avoidance. The full results of this study on the private student loan market will be released this summer. (See March 23 News Now story: CFPB ombudsman blogs on 'sobering' student debt)
The number of credit unions offering student loans continues to increase, and CBS MoneyWatch recently recommended that college students seeking additional financial assistance "turn to a credit union." (See March 16 News Now story: CBS Moneywatch: Turn to CUs for student loans).