[Congressional Record Volume 158, Number 161 (Thursday, December 13, 2012)]
[Senate]
[Pages S8021-S8022]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]




                              STUDENT DEBT

  Mr. DURBIN. Mr. President, every week I hear from students across my 
State and around the Nation who are struggling with student loans. 
Congress has acted on important legislation to help students with these 
loans by keeping the interest rate of Federal subsidized student loans 
at a low 3.4 percent, but we need to do more for borrowers and their 
families because the private student loans have become burdensome and 
unmanageable.
  While other types of consumer loan debt are decreasing, there is one 
category that is increasing, student loan debt. Student loan debt is 
more burdensome than other debts. Lenders often will not work with 
borrowers; take it or leave it. As we all know, student loans--because 
of the action of Congress--are not dischargeable in bankruptcy. Only in 
extremely rare circumstances when the debtor can establish undue 
hardship is a student loan dischargeable from a bankruptcy.
  Undue hardship is a court-defined term, and most courts use a three-
part analysis called the Brunner test that was created by the Second 
Circuit in 1987 to determine whether a student loan can be discharged 
in bankruptcy. The Brunner test requires that to establish ``undue 
hardship'' and receive a discharge of a student debt, a debtor must 
show ``that the debtor cannot maintain a minimal standard of living if 
forced to repay the loan.'' Second, that this state of affairs is 
likely to persist for a significant portion of the loan repayment 
period; and, third, that the debtor made good-faith efforts to repay 
the loan.
  This test--and especially the second part--is almost impossible to 
satisfy.
  Back in March I chaired a hearing in the Judiciary Committee on 
student loans and bankruptcy. One of the witnesses was Deanne Loonin of 
the National Consumer Law Center. Ms. Loonin testified that the ``undue 
hardship system is random, unfair and costly'' and that ``effectively 
it has become no choice at all for those who most need it.''
  Ms. Loonin noted that the second prong of the Brunner test ``forces 
borrowers to prove a negative--they must somehow prove that their 
future is as hopeless as their present.''
  In 2004 the Tenth Circuit Court of Appeals noted that courts have 
applied the Brunner test to deny discharge under even the most dire 
circumstances. That is because in many jurisdictions courts have 
construed that second prong of the Brunner test to require borrowers to 
show ``certainty of hopelessness.''
  On August 31, the New York Times ran an article about the Brunner 
test and this ``certainty of hopelessness'' standard. It was entitled 
``Last Plea on Student Loans: Proving a Hopeless Future.'' The article 
said:

       Lawyers sometimes joke about the impossibility of getting 
     over this high bar, even as they stand in front of judges. 
     ``What I say to the judge is that as long as we've got a 
     lottery, there is no certainty of hopelessness,'' said 
     William Brewer Jr., a bankruptcy attorney in Raleigh, N.C. 
     ``They smile, and then they rule against you.''

  The New York Times discussed a 2008 undue hardship case in my State 
of Illinois--in deep southern Illinois. The debtor, David Whitener, was 
visually disabled, unemployed, and living on about $900 a month of 
Social Security disability payments. The bankruptcy court rejected the 
undue hardship request finding that he had not proved ``certainty of 
hopelessness.'' Whitener's lawyer, Steve Stanton of Granite City, said 
of the case:

       I didn't even have the client pay me. In all of the cases 
     in 30 years of bankruptcy work, I came away with about the 
     worst taste in my mouth that I've ever had.

  Not only is it almost impossible to prove the hardship required by 
the Brunner test, most student borrowers are not even able to afford to 
try. That is because debtors have to bring a separate court case in 
addition to the bankruptcy case in order to seek this exception. That 
means paying a lawyer for another case and likely for an appeal.
  How can it be that the deck is so stacked against students who 
borrowed to go through school? How can ``certainty of hopelessness'' be 
the standard for borrowers to obtain any relief in bankruptcy court. 
This harkens back to the debtors prisons of Europe and England. Charles 
Dickens would have a ball with this standard.
  Congress needs to address this issue. Right now there is $150 billion 
in outstanding private student loan debt that is crushing many 
borrowers--$150 billion. I have a bill, the Fairness for

[[Page S8022]]

Struggling Students Act, that would once again permit private student 
loans to be discharged in bankruptcy as they were before 2005. Mark my 
words, there is no good reason why private student loans should be 
treated differently in bankruptcy from any other type of private 
unsecured debt.
  This 2005 change in the law was a special interest favor. It was 
never justified, never debated, and cannot even be explained today. 
Filing for bankruptcy is never a walk in the park, and it should be the 
last resort for anyone, including student borrowers. But many private 
student loans have outrageous terms forced on kids--or just barely 
beyond being kids--and their families. Students are saddled with those 
loans. Many of them would not even understand the standard of 
``certainty of hopelessness'' that is required before there is any 
relief in bankruptcy court. The problem is not going away; it is 
getting worse. The student debt, when they start to default, just grows 
in size.
  One of my recent e-mails came from a victim of one of these for-
profit schools. The initial debt this student had after the student 
dropped out of the for-profit school was about $80,000 in private 
loans. Because the student could not get a job, the debt just grew. It 
is now $103,000. The student lives in the basement of the family home 
and has no hope. She cannot borrow any money for a car to go back to 
school or for any purpose. She is stuck, and it is not dischargeable in 
bankruptcy.
  Bankruptcy reform would help borrowers like Malissa Peloquin. She 
left Westwood College--one of the most notorious for-profit schools--in 
2007 with $75,000 in student loan debt. It is a debt that Westwood 
College advisers and counselors had lured her into. Her Federal loans 
have an interest rate below 4 percent, but her private student loans 
are at more that 11 percent.
  Malissa has never defaulted on her loans, but with three kids, she 
struggles to make the payments every month. She fears that she will 
lose her home because the home payments are difficult to keep up 
because of the student loan debt.
  Her mother, who is 65 years old, cosigned two of her daughter's 
student loans just to help her.
  Malissa worries what will happen when she cannot pay. Will they go 
after her mother? We know they do. In the past there have been reports 
about garnishing Social Security checks on the parents and grandparents 
who cosigned student loans when the student defaulted.
  Malissa has considered filing for bankruptcy, but she knows that 
private student loans are not dischargeable as set by this outrageous 
standard. She said if she could go back in time, there is no way she 
would have ever taken out those loans.
  How many young people 18, 19, 20 years old sit across the desk from 
an admissions officer who pushes the papers in front of them and says: 
If you sign these papers, you will be in class next week. How many 
think: I have been told, as long as I can remember, go to school, get a 
degree? They anxiously sign them never thinking that they are building 
up a debt in many cases that will dog them for life.
  We need to help borrowers such as Malissa who are struggling. I hope 
my colleagues will take a serious look at this. This is totally unfair. 
The for-profit college industry is disgraceful. Remember three numbers: 
12 percent of all the students after high school go to for-profit 
schools; 25 percent of all Federal aid to education goes to for-profit 
schools; and 47 percent of all student loan defaults are of the 
students at for-profit schools. It tells us the story.
  They drag these kids deep in debt, hand them worthless diplomas, 
watch them default, and then lives ruined by what students thought was 
the right decision early in life. Who is responsible for it? The 
Congress? The President? The government? Check all of the above. We 
have created this circumstance that costs $32 billion a year, money 
that we send to these for-profit colleges. If they were a separate 
Federal agency, for-profit colleges would be the ninth largest Federal 
agency in Washington, DC. They receive subsidies from 85 to 95 percent 
of all of their expenses directly from the Federal Government. Calling 
their employees Federal employees is not a stretch. They are all paid 
for by the Federal Government as are their advertising and marketing 
expenses.
  When we put this all together, it is rotten. The students who are 
contacting my office, and many other Senators, are crying out for help 
and relief. If we cannot help these young people after the exploitation 
of the for-profit schools and others, shame on us.
  I yield the floor and suggest the absence of a quorum.
  The assistant legislative clerk proceeded to call the roll.
  The PRESIDING OFFICER. The Senator from New Mexico.
  Mr. BINGAMAN. Mr. President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.

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