Times are tough for college graduates. The job market isn’t offering what was once promised as a reward for gaining an education. Many students are graduating only to find themselves deep in debt with student loans and very little income to repay these loans. Even worse is the lack of options available for debt relief on defaulted student loans. Federal student loans are not eligible for discharge through bankruptcy, but do offer some debt relief assistance programs. For loans that are privately funded, there are even fewer debt relief assistance options than a federal student loan.
Private Student Loan Problems
Over the past few years, federally funded loans have become increasingly difficult to obtain, sending college hopefulls through the door of private lenders. Privately funded student loans has become the most profitable sector of the student loan industry. Changes were made to the Bankruptcy Code in 2005 that prevented private student loans from being discharged in bankruptcy, a protection that had been in place since 1978. Borrowers of private student loans can not have their debts discharged through bankruptcy. Further, private lenders do not offer the debt relief assistance plans that are in place for borrowers of federal student loans, such as the Income-Based Repayment plan and the Public Service Loan Forgiveness program. These Federal programs were designed to help struggling students repay their federal student loans.
New Bill Pushes For Protection
Backed by 35 groups and organizations, a new bill has been proposed to restore the prevous Bankruptcy Code allowances for private student loans to be eligible for discharge in bankruptcy. This bill is seeking to overturn the changes to the 2005 Bankruptcy Code that prevented private student loans from receving debt relief through bankruptcy. For private student loan borrowers that find themselves unable to repay their debts, the new bill would provide protection under the bankruptcy laws. One of the front runners for the bill, Senate Representative Steve Cohen says, “People who seek higher education to better their futures should not be dissuaded from doing so by the threat of financial ruin.” Many student loan borrowers were unaware they would be left without many career options as the result of a wavering economy, not to mention left alone without any assistance in debt repayment assistance. The goal of this new bill is to find a solution for hard-working graduates that found themselves facing the harsh truth in a struggling job market.