A US Congressman from Tennessee authored an editorial last week in US News & World Report, urging lawmakers to allow citizens to discharge private student loans in bankruptcy cases.
“This year, total student loan debt exceeded $1 trillion, more than any other kind of consumer debt. Debt from student loans issued by private for-profit lenders is troublesome,” Rep. Steve Cohen-D said. “Unfortunately, current law prevents struggling borrowers from discharging their private student loan debts in bankruptcy like they can with other kinds of debt. This situation must change.”
Currently, the only way student loans can be dismissed is if a borrower can show the loans are an “undue hardship”, which is hard to prove. “Private lenders are not required to—and often do not—provide the deferments, income-based repayment plans, cancellation rights, or loan forgiveness that are available to federal loan borrowers,” Cohen argued.
“There is no principled reason that for-profit lenders should enjoy special protection not given to other creditors. Under bankruptcy law, only certain debts cannot be discharged, such as spousal and child support, certain taxes and debts incurred based on the debtor’s fraud or other bad actions. These exemptions exist for principled policy reasons that don’t apply to private student loans,” Cohen said.
We have long advocated for student loan reform. This country is now facing a higher education bubble that is going to burst. Last year, nearly 15 percent of student loan borrows defaulted on their loans, when the average balance was $23,300. In this economy, many college graduates are finding themselves without employment, while trying to grapple with housing payments, credit card bills and other forms of debts, on top of high student loan payments.
Although you may not be able to discharge student loan debts, you can still free up money for payments by filing for Chapter 7 or Chapter 13 bankruptcy. An ‘automatic stay’ triggered by a bankruptcy filing puts an end to credit card collection attempts and can end lawsuits brought on by lenders.
If you are struggling with student loan debt, as well as credit card debt and medical bills, contact our Washington DC and Maryland bankruptcy lawyer now for a free consultation.