Sen. Dick Durbin wants to help students, and sometimes their parents, avoid being saddled by overwhelming student loans.
Speaking at Loyola University in Chicago, the Illinois Democrat on Monday called for greater regulation of private student loans, which often carry higher interest rates, premiums and conditions than loans offered by the federal government.
Among the reforms he wants: an end to the “preferred treatment” that private student loans have when it comes to bankruptcy.
“Every other debt that you incur — automobile, home, credit card — can be discharged in bankruptcy if you reach a disastrous point in your life, but not private student loan debt. What does that mean? It means that debt is with you to the grave. It is a new debtor’s prison,” said Durbin.
Durbin has introduced legislation that would require lenders to make full disclosures when issuing a loan. He said schools often don’t do enough to explain the differences between the two types of loans, and that leads to students making bad decisions that negatively affect them later in life.
“Most students just sign. They have no idea what they’re getting into,” he said. “They lack life experience. This is not an arms-length transaction between two parties who each understand the terms.”
Nearly three million Americans have private student loans, collectively owing approximately $150 billion, The Fiscal Times reported last month.