On Wednesday (9/23/09) at 1PM the House Committee on the Judiciary Subcommittee on Commercial and Administrative Law will be holding a hearing called “An Undue Hardship? Discharging Educational Debt in Bankruptcy.”

If that sounds a bit boring, then you haven’t been paying attention.  Private student loans, which contain few borrower protections and high interest rates, became nearly impossible to discharge under bankruptcy because of legislation passed in 2005. This has made private student loans more dangerous for students and more lucrative banks.

The bottom line: students have been singled out for less protection. What does this say about our country’s priorities?

This protection for student loan companies hurts struggling borrowers, and encourages predatory lending (especially at proprietary trade schools). With less to lose, banks are often willing to lend dangerous amounts of money to students.  The schools that these banks target are often of extremely poor quality. A few have even closed mid-semester, leaving students with a mountain of debt and a handful of worthless credits.

Borrowers who got caught up in this mess are the ones that need protection, not the student loan companies. We hope that the hearing is insightful for committee members, and that it will be the first step toward a reevaluation of this policy.

If you want to learn more about predatory student lending, Higher Ed Watch, which supplied many of the links in the post, is a must-read blog.

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