Borrowers struggling with student loan debt may be getting some much needed relief. The Obama administration has reached out to Congress in an attempt to make it easier for some student loan borrowers to discharge their debt through bankruptcy. A recent report released by the U.S. Department of Education outlined a proposal for improving the nation’s student loan system, which will require congressional action.
The most significant change is for Congress to ease the process for private student loan borrowers seeking to have their loans discharged through bankruptcy. The administration is proposing that Congress re-enact a 2005 law, which allowed bankruptcy filers to discharge their private student loan debt.
For consumer advocates and some congressional Democrats, this has been a long time coming, but this is the first time the Obama administration has supported a revision to the rules governing how student loans are processed in bankruptcy.
According to Under Secretary of Education Ted Mitchell, “All other types of consumer debt are dischargeable in bankruptcy and we think private student loans are a glaring exception.” “We think it’s important to do what we can to create those protections, and we think starting with a bankruptcy provision is the way to go,” he continued.
The administration’s proposal would extend borrower protections to private student loans that do not offer flexible repayment plans like those granted to federal loan borrowers. The report states that “there are strong grounds for maintaining different standards for federal student loans.”
Federal student loans are not underwritten and typically have generous terms and protections. Monthly payments can often be limited based on income. By contrast, private student loans tend to lack those protections and can leave borrowers in financial distress with few options.
Along with changes to federal bankruptcy laws, the administration has proposed adding other consumer protections to private student loans, such as barring private lenders from automatically declaring a loan in default when a co-signer dies.
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For borrowers who are struggling with student loan debt, relief options are available. Many student loan borrowers are unaware that they have rights and repayment options available to them, such as postponement of loan payments, reduction of payments or even a complete discharge of the debt. It is important you contact an experienced Miami bankruptcy attorney who can advise you of all of your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade & Garcia, P.A. has been helping people from all walks of life build a better tomorrow. Our attorneys’ help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade & Garcia website at www.miamibankruptcy.com.