Recently, President Barack Obama has announced his desire for what he calls “A Student Aid Bill of Rights.” Its purpose is to make the repayment of student loans much easier. His proposal for student loan debt solution may make it easier for former students to discharge their debt through bankruptcy.
President Obama is expected to have a report by October 1, 2015 from the departments of the Treasury and Education, as well as the Consumer Financial Protection Bureau, which will determine if student loans will have a new bankruptcy solution or not.
Lenders are not keen to the idea of changing the bankruptcy laws, but there are many student debt solution advocates that believe that those considerably burdened by their debt should be able to discharge their student loans.
Currently, total student debt for the entire nation is approximately 1.2 trillion dollars. That is about twice as much as the federal budget for national defense, which is $637 billion.
This leads us to an important question. Do the current bankruptcy laws show any potential to lower this student debt epidemic?
Do Former Students Have Any Debt Solutions Through Bankruptcy Today?
Mr. Obama’s plan, or a similar plan, will be needed if bankruptcy attorneys hope to help put a dent in this 1.2 trillion dollar student debt. For now, student loan debt can only be discharged in very rare circumstances. Students must prove that their student loans have caused “undue hardship” to discharge some or all of their student loan debt.
Generally, you must prove that both your income is low and that the burden of paying your debt is placing you below a minimum standard of living. You can learn more about bankruptcy and student loan debt by reading one of our previous blogs.
In addition to a possible change in in bankruptcy laws, Mr. Obama is hoping to have new laws in place to protect borrowers.
[Did You Know? 40 million Americans are burdened by student loans.]