Would forgiving student loans during bankruptcy provide relief to millions of Americans shouldering debt from college? That is the question several lawmakers and even the White House are considering this year. In the last few months, congressmen and the White House have both publicly recognized that a new change in bankruptcy law may be called for.
In January, Representative John Delaney of Maryland proposed the Discharge Student Loans in Bankruptcy Act, H.R. 499. This bill would effectively forgive student loan debt under a bankruptcy filing. According to Representative Delaney's website: ""Student loan debt is dragging down economic growth, keeping the American Dream out of reach for many and is a monthly strain for millions. While student loan debt is a complex problem that will require many solutions... we also need to reform our laws to help those with the absolute greatest need."
Representative Delaney's website also links to a study by The Institute of College Access & Success called "Student Debt and the Class of 2013". The study found:
- 69% of 2013 graduates has student debt
- The national average for student debt is $28,400
- The average student debt in New York is $26,381
Expansion of Bankruptcy Laws
Just this week, President Obama revealed that his administration is looking into just how effective making student loans dischargeable during bankruptcy would be in providing relief for borrowers. According to the Wall Street Journal, federal loans make up about 90% of all student loans in America, but the White House is looking into measures that would affect all student loans, even those from private lenders.
Still, even those hopeful for this expansion of bankruptcy law are skeptical that any of it will come to pass. Not only would the president and Representative Delaney's proposals face a Republican-controlled Congress, but many are doubtful that filing for bankruptcy would be a viable option for those struggling with student loans. Even more concerning for some is that a change in bankruptcy law would not affect the principle cause for student over-borrowing: rising tuition fees.
If you are facing significant financial strain and want to explore how bankruptcy could provide you relief, then we invite you to contact Jacoby & Jacoby. Our legal team has accumulated more than half a century of bankruptcy law experience and is ready to help you explore your financial options during this difficult time.
Call us today to schedule a free case evaluation.