Fixing the Student Loan Discharge Law

The Chronicle reports that on Wednesday, a subcommittee of the U.S. House of Representatives held a hearing on why Congress should change a law that prevents private student loans from being automatically discharged when a person declares bankruptcy.

Since 2005, those who declare bankruptcy and have student debt—either through federally guaranteed or private loans—have been able to rid themselves of that debt only when they can prove to a judge that repaying it would be an “undue hardship.” But during Wednesday’s hearing, Rep. Danny K. Davis (D-IL) and a variety of education experts argued that this policy harms the growing number of students who are taking out private loans, many of whom are African-American.

Davis is most likely correct. From 2004 to 2008, the percentage of undergrads relying on private loans nearly tripled, from 5 percent to 14 percent, and although minorities do not take out private loans at a significantly greater rate than the overall population, the costly legal fees associated with proving “undue hardship” place an especially large burden on low-income households. One can only hope that Wednesday’s hearing is a signal that things are moving in the right direction.

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Daniel Fromson

Daniel Fromson is an editorial intern at the Washington Monthly. He previously interned at Harper's Magazine, and he has written for Dow Jones Newswires and the Wall Street Journal.