Many students in New York and throughout the country are struggling to find jobs to pay off their mounting student debt. While other types of debt may be dischargeable by filing for bankruptcy, private student loans can rarely be discharged thanks to a bankruptcy reform package that became law in 2005. Democrats are trying to reauthorize the Higher Education Act and help students who have existing college debt, but the battle has been difficult.
The Democratic chair of the Senate Health, Education, Labor and Pension Committee introduced several items in the Higher Education Affordability Act that would attempt to help students deal with their debt and with the costs of attending college. The higher education package would allow former students to discharge their private loans by filing for bankruptcy. Federal student loans, which make up about 85 percent of the overall education debt, would still be subject to the previous laws that prevent them from being discharged through bankruptcy.
The Democrat who submitted the Senate proposal said that a series of bipartisan hearings led him to draft the suggestions in his higher education package. While federal loans give students some slack if they are not able to afford immediate payments, private student loans do not have any required protections, meaning that a former student’s credit could be damaged if the person could not make payments on time. There is also a House Republican proposal for the reauthorization of the Higher Education Act, but this proposal does not say anything about the accountability of private student loans.
Individuals who are struggling to make the payments on their loans may want to speak with a bankruptcy attorney. The attorney could consult people as to whether filing for bankruptcy is a good option and provide advice on which type of bankruptcy to file for and when.
Source: The Huffington Post, “Senate Proposal Would Restore Bankruptcy Protection For Private Student Loans“, Tyler Kingkade, June 25, 2014