Today the Times--in other tepid and timid editorial--calls for better disclosure for private student loans. The Times is responding to the recent report by the Consumer Financial Protection Bureau. The report found that 40 percent of students who took out private loans were eligible for less costly federal loans.
The Times supports a pending bill "that would require colleges and lenders to thoroughly explain borrowing options to students." In addition, the Times reports, the proposed law will "prevent unnecessary borrowing by requiring lenders to check with colleges to determine how much money students are eligible to receive."
Blah, blah, blah.
Here are the central facts about private student loans.
- Like federal student loans, private student loans are almost impossible to discharge in bankruptcy.
- Ninety percent of private student loans are issued to student borrowers with a co-signor. In other words, parents are often co-signing their children's student loans and obligate themselves to pay them back if their child defaults.
- According to the CFPB report (p. 64), 850,000 private student loans--an astonishing number--are in default.
Congress can do one simple thing to protect private student-loan borrowers; it can amend the Bankruptcy Code to make private student loans dischargeable in bankruptcy.
Editorial, "Better Disclosure for Private Loans," New York Times, July 26,2012.