U.S. Sen. Maggie Hassan

WASHINGTON – U.S. Senator Maggie Hassan joined her colleagues in sounding the alarm on private student loan companies that are intentionally misrepresenting to borrowers the possibility of getting their student loans erased in the event of bankruptcy. The letter was led by Senators Dick Durbin (D-IL) and Sherrod Brown (D-OH).

The Senators’ letter to the Consumer Financial Protection Bureau (CFPB) comes after a report from the Student Borrower Protection Center (SBPC) that found that 2.6 million borrowers with “non-qualified” private student loan debt could be eligible for loan cancellation through bankruptcy, but lenders are intentionally misrepresenting this eligibility to borrowers. Federal law prevents “qualified” student loans – those federal and private loans used to finance education at an institution of higher education that qualifies for federal student aid – from being erased or “discharged” in the event of bankruptcy except in cases of “undue hardship.” Non-qualified private loans can be discharged without meeting the undue hardship burden.

“The SBPC found that private student loan lenders took advantage of the widespread belief that all private student loans are non-dischargeable in bankruptcy and that lenders marketed their non-qualified education loans under this false pretense,” the Senators wrote. “At the same time, when these companies sold non-qualified debts to Wall Street investors, they explicitly disclosed that non-qualified education loans were eligible for discharge in bankruptcy–telling investors the truth while lying to borrowers.”

The Senators continued, “There is growing bipartisan consensus in Congress that student loan bankruptcy laws should be overhauled to make them fairer and more workable for borrowers who have no other options for relief. But, as we continue to work on lasting changes to these laws, we must not allow companies to fraudulently prevent borrowers from seeking the little relief that is afforded under current law. We urge the CFPB to review the troubling findings in the SBPC report and take appropriate action.”

Hassan is leading efforts in Congress to protect students, and is also working to strengthen the Public Service Loan Forgiveness program to help ensure that millions of public servants — such as fire fighters, law enforcement, teachers, and members of the military — qualify for the loan forgiveness that they have earned. Additionally, the Senator helped close a loophole in the American Rescue Plan that for-profit colleges use to take advantage of veterans, service members, and their families.