Most bankruptcy lawyers around the USA have long felt that student loan debt should be covered by bankruptcy in certain situations, but as the laws stand now this can not happen. Hundreds of thousands of Americans face staggering amounts of student loan debt. This debt will prevent them from gaining financial security, and may take a decade or more to pay off in some cases.
The current economic state of America has caused many individuals to face financial difficulty after graduation. A college degree is no longer a guaranty to financial security and many graduates can not find jobs in their respective fields. This causes an inability to pay off the loans and can follow consumers for life.
The Obama Administration Urges Congress To Act On Student Loans
The Obama administration has taken notice of what bankruptcy lawyers and bankruptcy association shave been saying. This has resulted in a push by the administration to have Congress change the bankruptcy laws so that student loans can be discharged in certain situations if the new requirements are met.
Many politicians also feel that student loans need to be addressed by the bankruptcy laws. So far there has been a lot of talk about this problem but few solutions have been proposed. One problem is determining just which student loans to allow a discharge for. Even if strict restrictions are put in place regarding the types of student loans that would qualify for bankruptcy many American consumers would benefit and finally get the debt relief needed.
Some Very Telling Student Loan Debt Facts And Bankruptcy Statistics
Americans are in debt for student loans in a staggering amount, more than $150 billion currently. Student loans may be offered by the federal government, the state government, and private lenders. A large percentage of these loans are through a private lender versus a government program, and this can create a big issue. Private lenders do not structure student loans in a consumer friendly way in many cases, and these loans may have a much higher interest rate as well.
The terms of a private loan may not be as clear, and this has caused many consumers to agree to terms which are not in their best interests. When the bankruptcy laws underwent a comprehensive revision in 2005 the changes did not include allowing private student loan debt to be discharged. Because of this Congress has started evaluating whether or not to allow student loan debt discharge in certain circumstances.
One of the restrictions that will probably be placed on student loan debt discharge is that the consumer must at least attempt to pay off the debt before any discharge is possible. This restriction will assure lenders that a discharge will not be automatically provided for new student debt. Some private lenders, including Sallie May, say that they are supportive of allowing certain student loans to be discharged through bankruptcy as long as there are restrictions in place to prevent abuse.