According to a new report, more than 850,000 private student loans are currently in default. The Senate Banking Committee examined the findings of the Consumer Financial Protection Bureau (CFPB) study and considered options for students unable to pay back their loans.
The report finds that many students did not fully understand the requirements of their education loans and did not know the difference between government-backed loans and private party loans.
The report also suggests that the student loan crisis mirrors the housing market crisis, with aggressive marketers steering uninformed students towards high-interest private loans with little concern for whether the borrowers could pay back their education debts.
The committee considered bankruptcy for student debtors, an option currently not available for holders of federal and private student loans.
Rohit Chopra, the CFPB's student loan ombudsman, was the sole witness on the first panel.
Witnesses on the second panel included: Deanne Loonin, attorney and director, Student Loan Borrower Assistance Project, National Consumer Law Center; Jen Mishory, deputy director, Young Invincibles; and Jack Remondi, president and chief operating officer, Sallie Mae.
Sen. Sherrod Brown (D-OH) chaired the hearing.