A group of Democratic senators introduced a bill Jan.23 that would allow privately issued studentloans to be discharged along with other bankruptcydebt. 

S. 114, the “Fairness for Struggling Students Act of 2013,” issponsored by Sen. Richard Durbin (D-Ill.) and is co-sponsored bySen. Al Franken (D-Minn.), Sen. Tom Harkin (D-Iowa), Sen. Jack Reed(D-R.I.), Sen. Elizabeth Warren (D-Mass.) and Sen. SheldonWhitehouse (D-R.I.).

“Too many Americans are carrying around mortgage-sized studentloan debt that forces them to put off major life decisions likebuying a home or starting a family,” Durbin said. “It's not onlyyoung people facing this crisis, it is parents, siblings and evengrandparents who co-signed private loans long ago and are stillmaking payments decades later. It's time for action. We can nolonger sit by while this student debt bomb keeps ticking.”

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 concerned withany legislation that proposes changes to bankruptcylaws. 

NAFCU Vice President of Legislative Affairs Brad Thaler said,“While we recognize the effort to go after unscrupulous lenders whounfairly target students with a repugnant profit motive in mind, wehave serious concerns about any changes to the bankruptcy code thatcould drive credit unions away from a product that many of theirmembers want and need.”

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 billwould require schools to counsel students before they take onprivate student loan debt and inform them if they have any untappedfederal 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,” Harkin said“Students need to know how to avoid the higher interest rates andless favorable terms of private loans, so they can be on morestable financial footing when they graduate.”

Both bills died in the Senate last year after being referred tocommittee.