With more and more adults going back to school in light of the recent recession, federal and private student loans are on the increase. This is a trend that doesn’t appear to be ending anytime in the foreseeable future.
According to a report from the Center for American Progress (CAP), debtors that are 60 or older are the faction of borrowers growing the fastest. They are either borrowing to further their own education or to finance an education for children.
What happens when someone cannot pay back their student loans? According to the Consumer Financial Protection Bureau, 7 million people are currently in default on student loans. Their wages can be garnished, their credit can be ruined, and even income tax refunds can be confiscated. The credit issue can also spiral into people being unable to purchase homes, which affects our economy as a whole.
Getting out from under this debt is almost impossible. Even if a person files bankruptcy, student loans are usually not dischargeable. However, CAP has put forth a proposal to try to change some of the current laws regarding student loan debt. The proposal requests that both federal and student loans be allowed to be discharged in bankruptcy, and also calls for specific loans to be reclassified.
For instance, interest rates for loans would not be able to exceed caps that are set by Congress, and these loans would be classified as “Qualified Student Loans.” These loans would be protected from bankruptcy, but must offer repayment options for students that are affordable. Deferment options and forbearance provisions, as well as income-based repayment terms, are also essential according to the proposal.
Nonqualified student loans should be dischargeable in Chapter 7 bankruptcies if an individual finds themselves in a situation where they need to utilize this option.
Attorneys in New Hampshire stay on top of the bankruptcy laws and can inform, advise and help individuals who find themselves in a situation where their student debt is unmanageable.
Source: huffingtonpost.com, “Bankruptcy Should Be An Option For Some Student Loans: Report” Tyler Kingkade, Aug. 20, 2013