A Senate bill introduced Jan. 23 would allow privately issuedstudentloans to be discharged along with other bankruptcy debt.

S. 114, the Fairness for Struggling Students Act of 2013, issponsored by Sen. Richard Durbin (D-Ill.) and is cosponsored bySens. Al Franken (D-Minn.), Tom Harkin (D-Iowa), Jack Reed (D-R.I.),Elizabeth Warren (D-Mass.) and Sheldon Whitehouse (D-R.I.).

In a release from Durbin's office, private student loans weredescribed as involving only “private profit” and resembling “creditcards rather than financial aid with uncapped variable interestrates, hefty origination fees and few, if any, consumerprotections.” According to the Consumer Financial ProtectionBureau, the average student owes $24,301 in student loan debt, withprivate student loans representing $150 billion worth of studentdebt of a total of $1 trillion borrowed.

“Too many Americans are carrying around mortgage-sizedstudent loan debt that forces them to put off major life decisionslike buying a home or starting a family,” Durbin said.

“It's not only young people facing this crisis, it is parents,siblings and even grandparents who co-signed private loans long agoand are still making payments decades later,” the Illinois Democratsaid. “It's time for action. We can no longer sit by while thisstudent debt bomb keeps ticking.”

Harkin called student loan debt “the next mortgage crisis” andlauded a second bill reintroduced by Durbin and Franken that heco-sponsored, the Know Before You Owe Act of 2013.

That bill would require schools to counsel students before theytake on private student loan debt and inform them if they have anyuntapped federal student aid eligibility. It would also require theprospective borrower's school to confirm the student's enrollmentstatus, cost of attendance and estimated federal financial aidassistance before the private student loan is approved.

“By empowering students with clear guidance about their federalfinancial aid options before they turn to more expensive privateloans and restoring the option to discharge private loan debtthrough bankruptcy, the Know Before You Owe Act and the Fairnessfor Struggling Students Act will go a long way to help studentsmake smart choices and provide relief to borrowers,” Harkinsaid.

“Students need to know how to avoid the higher interest ratesand less favorable terms of private loans, so they can be on morestable financial footing when they graduate,” the Iowa Democratsaid.

Both bills died in the Senate last year after being referred tocommittee; House versions didn't advance any further.

CUNA said it estimates around 300 credit unions currently offerstudent loans to their members. Senior Vice President ofLegislative Affairs Ryan Donovan said the trade hasn't yet taken aposition on the bankruptcy bill, but said CUNA is “generallyconcerned” with any legislation that proposes changes to bankruptcylaws.