Lawmaker wants president to discharge student loan debt

May 8, 2013

By Katy Grimes

SACRAMENTO — In 2006, a major rewrite of the federal bankruptcy law allowed for federal student loans to be dischargeable. Prior to 2006, student loans, along with taxes, were always required to be paid back in bankruptcy court.

Now, Assemblyman Bob Wieckowski, D-Fremont, also a Bankruptcy lawyer, wants private student loans to also be dischargeable in bankruptcy. Assembly Joint Resolution 11 would urge the President and Congress to allow the discharge of private student loan debt in bankruptcy.

At a hearing on Tuesday in the Assembly Banking and Finance Committee, Wieckowski admitted his bill, AJR 11, was largely a political decision, but not all Democrats were in agreement.

“Why would I go for this?” asked Assemblywoman Shirley Weber, D-Lemon Grove. “It creates an inequity between one institution or another.”

“Most students know these loans are not dischargeable… makes them think twice before spending,” Weber added. “Students are pretty smart sometimes.”

But it became clear that one target of the resolution is private technical and vocational schools. “Technical schools are ripping people off,” said Assemblyman Bob Blumenfield, D-Los Angeles. “This may be a good thing.”

Some lawmakers have tried for several years to kill off private vocational schools, which do not hire union teachers. Granted, some of these technical and vocational schools have predatory lending practices, most are very good and serve a valuable purpose.

But the primary issue is the growing student loan debt in America. According to the bill analysis, of the 20 million who attend college each year, close to 12 million, or 60 percent, take out student loans to cover the cost. And, there are 37 million student loan borrowers with outstanding student loans today.

Committee Chairman, Assemblyman Roger Dickinson, D-Sacramento, added: “People who take out a loan in good faith should not be asked to carry the debt for the rest of their lives.”

But taking out a loan in good faith means you will pay the loan back. Otherwise lenders would not be lenders — they’d be philanthropists.