In our May 8 post, we talked about the cost of a college education and the country’s student loan debt crisis. Going into debt for an education has always been a gamble against future earnings. The problem now is that wages are stagnant, but tuition is not.

The post dovetails nicely with the discussion we started on April 25 about a resolution passed recently by the Illinois House of Representatives. The House is urging Congress to change the lending laws that apply to student loans, especially the consumer protection laws that apply to other types of debt while specifically exempting student loans.

The House points out that there is no longer a statute of limitations on federal student loans, they are not protected under the Truth in Lending Act, and borrowers cannot negotiate a lower interest rate. All of these changes have taken place at the same time colleges and universities have been raising tuition at an unprecedented rate.

The best example of the federal government’s apparent ignorance of the crisis is that student loans continue to be exempted (in most circumstances) from both Chapter 7 and Chapter 13 bankruptcy. Borrowers have very few options for relief outside of default.

The message is clear: If the federal government wants to reduce the number of defaults, there should be more avenues for relief. The Department of Education has shirked its responsibilities by not offering student borrowers more protection, the House says.

It is time for the federal government to reverse its punitive approach to student loans. The House calls for the restoration of consumer protections — including all of the items listed above — for student borrowers. These protections should cover both private and federal loans, according to the resolution.

What happens next, though, is anyone’s guess.


Chicago Sun-Times, “House calls for student loans to be forgiven in bankruptcy,” Elise Dismer, April 9, 2014

Illinois House of Representatives, House Resolution 620, as adopted April 9, 2014