Private Loan Bankruptcy Protection | 06.22.11
There has recently been a lot of action on capitol hill surrounding private student loans. On the floor are two bills that are intended to restore a benefit for student loan holders and help borrowers in their loan repayment struggles. The Fairness for Struggling Students Act and Private Student Loan Bankruptcy Act both aim to provide bankruptcy protection for student loan borrowers.
One potential drawback of student loans for many students is the inability to have these loans discharged through bankruptcy. While federal loans at least offer income based repayment plans and deferment, private loans have fewer repayment options and can make repayment particularly stressful. These new bills would provide safeguards for students who find themselves in financial crises. The bills will restore the laws that were retracted in 2005, and once again make student loans dischargeable in bankruptcy.
Possible impacts of these student loan acts
While bankruptcy is certainly not a state that many prepare for when taking out student loans, it’s still an important safeguard to have in place. The current student loan debt is the highest loan debt in the nation, even higher than both mortgage and credit card debt! Thousands of students who have fallen into student loan default have found themselves in tough situations financially, and these bills could be a step in the right direction for alleviating some of this debt burden.
For some good tips on preventing loan default, read How to Avoid Student Loan Default.
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