A number of Democratic U.S. lawmakers are now making a large push that may help those in particularly dire financial straits to find relief from student loan debt, which currently cannot be discharged through bankruptcy.
U.S. Senators Dick Durbin, Sheldon Whitehouse and Al Franken joined with Reps. Steve Cohen, Danny Davis, George Miller and John Conyers to introduce bills that will allow consumers to clear outstanding private student loan debts when filing forbankruptcy, Durbin’s office announced. Prior to the passage of new bankruptcy laws in 2005, these loans could be cleared like any other private debt, but are no longer able to be discharged. Durbin first introduced legislation to change that policy in 2007.
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“Students, especially those at for-profit schools, who find themselves unable to get enough government aid to pay their high tuition are turning to private loans to fill the gap,” Durbin said when announcing the proposed legislation. “Unlike federal student loans, there are few consumer protections available for these private student loans leaving some students stuck with this debtfor the rest of their lives. Today’s bill will restore some fairness in student lending, by allowing financially distressed borrowers of private student loans to discharge those loans in bankruptcy, just as other types of private debt can bedischarged.”
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Billions of dollars worth of private student loans are now being issued every year, and many of these carry interest rates as high as 15 percent. Federal student loans, meanwhile, carry interest rates in the single digits. However, many students seek out the private lines of credit when they find it difficult to qualify for federal loans, or simply don’t get as much financial help from the latter type as they need to cover their various costs, including tuition, room and board, necessary supplies, and so forth.
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Students looking for help making ends meet without taking on costly student loans may want to talk to their college’s financial aid office about the options that may be available to them, including scholarships, grants and so forth, as these options will help consumers finance their education without incurring debt. However, failing those options, the office can also help students find the most affordable student loans available. In many cases, all it may take is asking for help tofind a wide variety options.
[Related Story: Defaulting on Private vs. Federal Student Loans]
Image: GlynLowePhotos, via Flickr
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