I hope at least a few college students will read this. I've done alot of research in this area, and feel this is a critical point to make.
**UPDATE**
In response to user demand, I have updated this diary below the original post below.
**UPDATE*
A lot of people have been asking me which democratic presidential candidate is most likely to work for the restoral of standard consumer protections for student loans. On this issue, the answer is very clear, and so I am sending this out to students on the KOS (hopefully in Texas and Ohio) so they can make an informed decision in the upcoming primary contests.
Of the two democratic candidates, Hillary Clinton and Barack Obama, Hillary Clinton has proven to be clearly superior on the issue of returning standard consumer protections to student loans. In fact, I have to say that Hillary Clinton has done more for this issue than any other member of Congress. Her staff worked with StudentLoanJustice.Org closely in early 2006 on the Student Borrower Bill of Rights. This legislation would restore bankruptcy protections to federally guaranteed student loans, would allow refinancing of the debt, and would provide a host of other consumer protections that are critical.
It was my hope that Obama or his staff would have said something substantial by now on this issue I have requested his staff repeatedly to give me an indication of their position, but they have declined to answer. In the absence of any information from the Obama staff, and in view of the Student Borrower Bill of Rights that Senator Clinton introduced in 2006, and reintroduced in 2007, I have to issue this strong endorsement for Senator Clinton.
I hope that you will disseminate this information to anyone in Ohio and Texas that you know who cares about this issue, particularly local media. I'm frankly getting a bit tired of Obama getting the nod from students when they don't really know what theiy're voting for.
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****************************UPDATE***************************
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I need to give a bit of legislative history here...
The Republican Congress removed nearly all standard consumer ptrotections from student loans. This includes bankruptcy protections, statutes of limitations, truth in lending requirements, refinancing rights, and other critical consumer protections that borrowers of EVERY OTHER TYPE OF LOAN IN AMERICA enjoy.
The rationale for the restriction, and ultimately, the removal of bankruptcy protections for federally guaranteed student loans was predicated largely on undocumented anecdotal examples promulgated by the lending industry of students who filed for bankruptcy upon graduation. In fact, most of the examples involved credit card debt, not student loan debt. Instances of this type of activity were reported widely in the media, and in 1978, Congress added a 7-year repayment requisite before student loans could be discharged in bankruptcy. The amendments to the Higher Education Act in 1998 went much further, and removed bankruptcy protections completely for the majority of borrowers.
Interestingly, the language that exempted student loans from bankruptcy discharge in the 1978 overhaul of bankruptcy laws- which reportedly came up "at the last minute" was opposed by both the primary co-sponsor of the bill, Rep. Don Edwards, and the Chairman of the House Subcommittee on Postsecondary Education, Rep. James O’Hara. Edwards’ opposition was strong. He said that Congress was "Fighting a ‘scandal’ which exists primarily in the imagination."
The statistics on bankruptcy filings, moreover, painted a far different picture from the one used as a premise for removing bankruptcy protections from student loans. People graduating from college, and then promptly filing for bankruptcy protections for the sole purpose of erasing student loan debt simply did not occur in numbers large enough to warrant such draconian legislation. In fact, it was shown by the Government Accountability Office that prior to the 1978 legislation fewer than 1% of federally guaranteed student loans were discharged in bankruptcy proceedings. Thus, the initial basis for the removal of bankruptcy protections is highly suspect and evidently without firm grounding in fact.
Another rationale given for the removal of bankruptcy protections for student loans is the fact that the federal government guarantees these loans. However, there is no precedent for this. There are no other federal loan guarantees in existence in the United States- secured or unsecured- that enjoy bankruptcy exemptions. From Farm Loans, to FEMA Loans, to SBA Loans, and all other government loans, and government loan guarantees, not a single one- with the exception of student loans- enjoy exemptions from bankruptcy discharge.
In general, higher education provides the nation with a public benefit. As such, student loans should, at least conceptually, be more agreeable to the borrower in terms of consumer protections than loans that do not contribute to the public good, such as credit cards gambling, or other debts. Yet, with student loans, we find that exactly the opposite is true. For the purposes of bankruptcy, student loans are in a class with criminal debt, unpaid child support, taxes, and alimony. It should be obvious to any logical thinker that this is wrong.
For private student loans, the lending industry argued that removal of bankruptcy protections would allow for greater accessibility of student loans to individuals with lower credit scores by allowing the lenders to relax the underwriting criteria. Two years after the removal by Congress of bankruptcy protections for private loans, however, no evidence could be found to show that the lenders followed through with their promise, based on disclosures by the largest private lenders in the prospectuses for private student loan securitizations. A study conducted by Mark Kantrowitz, Publisher of FinAid.org, found that since the removal of bankruptcy protections for private loans in 2005, the percentage of borrowers with low credit scores receiving private loans from Sallie Mae, for instance, increased by a mere 0.2%
In May 2006, Sen. Hillary Clinton (D-NY) introduced the Student Borrower Bill of Rights Act of 2007 (S.511). This legislation had a plethora of important modifications to the Higher Education Act, not the least of which was the reinstatement of bankruptcy protections for student loans. The act provided for the return of bankruptcy protections for federally guaranteed loans, with the restriction that borrowers be in repayment status for 7 years- effectively rolling back the law to pre-1998 conditions. The legislation was reintroduced in March 2007.
The Student Borrower Bill of Rights prefaced its language regarding bankruptcy by stating that the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) affords sufficient protections to prevent fraud and abuse in the carefully regulated discharge of student loans in bankruptcy.
Senator Clinton’s Student Borrower Bill of Rights also called for the right for students to refinance (or "reconsolidate") their federally guaranteed student loans. Surprisingly, no Republican members of Congress have stepped forward to similarly call for refinancing rights for federally-guaranteed student loans. This lack of commitment for free market enterprise among some members of Congress may suggest a conflict of interest for those whose campaign coffers are filled by individuals who would not benefit from such a free market.
Regardless of what happens during repayment of a loan, the borrower should never be forced to pay more than a certain amount over certain time periods on the loans, including fees, penalties and the like. This type of repayment cap would go a long way to ensure that citizens who weren’t necessarily in a position to file for bankruptcy would at least have some protections from exploitation by the industry. Again, Sen. Clinton’s Student Borrower Bill of Rights addresses this issue, and calls upon the Senate to study what reasonable repayment caps might look like over 10 and 25 year periods.
So, those of you still reading this can say what you want about how Obama is going to do this and that for students, but on all of these issues-ALL OF THEM- he has done NOTHING, and he has said NOTHING.