In the Higher Education Act Reauthorization (HR 4137) currently moving through Congress, an amendment by Representative Davis of Illinois would have extended some bankruptcy protection to students holding private student loans. Unfortunately for students, the amendment was voted down after strong opposition from banks and financial institutions.
The argument against the bankruptcy protection amendment was that its inclusion would ultimately make private student loans more expensive as lenders would need to increase rates and fees to cover loans that were in default and discharged in bankruptcy.
The Financial Aid Podcast has also done an analysis piece on this legislation.
The short version? For now, private student loan consolidation remains the best avenue for making private student loans more affordable.
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