Do you have student loans that you have been struggling to pay off? Have you ever wondered how many other people out there are in the same situation?
According to the Wall Street Journal, a dispute between private student loan lenders and federal regulators over statistics about defaults has become important, because many people argue that the private sector has a better record of accomplishment for student loan borrowers making payments.
The dispute between the parties has gone public after the Consumer Financial Protection Bureau released a damning report about student loan debt. According to the private lenders, borrowers with private loans are much more likely to pay off their loans than those with federal payments. According to the Consumer Bankers Association, a trade group of lenders, “only 3 [percent] of private student loans are seriously delinquent.”
Meanwhile, the U.S. Education Department, which makes federal student loans, has reported double-digit default rates, according to the Journal. According to the agency, of borrowers who started repayment in the fiscal year ended September 2011, 13.7 percent defaulted on their federal student loans within three years.
As the newspaper reported, federal and private student loans have two different methodologies when it comes to borrower eligibility—a large share of federal loans are taken out by student borrowers alone, while most private loans are co-signed by someone else, typically a parent, according to the Journal.
This means that parents, who could be held liable for the loans should their children default, are more likely to assist with payments.
I am Struggling to Pay My Student Loans. Should I Speak to a Bankruptcy Attorney?
Keep in mind, discharging student loan debt is extremely hard through bankruptcy. Most courts use what is known as the Brunner test to determine eligibility for discharge. This test has three criteria when determining a debtor’s financial hardships:
- Will continuing to make loan payments cause the borrower to be unable to maintain a basic standard of living?
- Is the borrower’s financial situation unlikely to improve?
- Has the borrower made an effort to pay his or her loans in good faith?
While it is hard to discharge student loans, it does not mean that a debtor should avoid a Chapter 7 or Chapter 13 bankruptcy, as both allow borrowers to eliminate other forms of debt, which may make paying student loans easier.
Remember, through a Chapter 7 bankruptcy, you can discharge unsecured debt, like medical bills and credit card debt.
If your student loan situation is causing you financial stress, contact our Washington DC and Maryland bankruptcy lawyer today for a consultation. You can also visit our Facebook page, our LinkedIn page, our Google+ page or our Twitter page.
Law Firm of Kevin D. Judd – Maryland and Washington DC bankruptcy attorney
Judd’s Judgment: A federal study found that there were more than 5,300 complaints filed in 2014 over private student loan lending tactics.