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CBA Statement on Department of Education Student Loan Bankruptcy Request for Information
WASHINGTON – Consumer Bankers Association President and CEO Richard Hunt released the following statement after the Department of Education issued a request for information on undue hardship claims for federal student loans during bankruptcy proceedings:
“We look forward to reviewing any proposal from the Administration and will offer comments discussing the key differences in the federal student loan program and the success of student loans offered by private lenders. Any future changes to bankruptcy treatment must recognize the clear distinction between these two programs.
“The default rate on private student loans is a fraction of what is seen in the federal program, as 98 percent of private borrowers are in repayment. Congress thoroughly discussed the current bankruptcy treatment of student loans and the small fraction of private student loan borrowers facing undue hardships can discharge their loans in bankruptcy court.”
NOTE: Private student loans are performing extremely well, with approximately 98 percent of loans in repayment. This success rate is attributable to CBA members’ careful underwriting, which is arguably the best consumer protection of all. According to reports, approximately 22 percent of federal student loans are more than 90 days past due or in default.