The Center for American Progress (CAP) released a report that suggests
Congress should reclassify how student loan debt is discharged in
bankruptcy. The report encourages Congress to review laws for both private and federal
loans and how they could be handled in bankruptcy. Currently, student
loan debt is almost impossible to discharge and it has been that way since
it was made into law back in 1976.
CAP is proposing that student loan interest rates be capped a certain rates
established by Congress. The long term goal would be to work toward making
such debt repayable under realistic terms for borrowers. The borrower
would need to meet specified standards of the educational institution
as far as job placement potential, graduate rates, salary projections,
and other evidence-based information.
CAP also proposes that students who may not meet specified qualifications
should be eligible to have their student loan debt discharged after a
certain time period. Unfortunately, the way the current model stands it
is contributing to the student loan debt crisis. Many people find themselves
in unfortunate situations such as job loss, lawsuits, and even wage garnishment,
making it more difficult to even make payments on terms that may not be
realistic to their current living situation.
Plus, many people who took out loans had them at high interest rates leaving
an overwhelming large amount of people to literally keep making loan payments
until the day they meet their grave. The report also notes that as the
unemployment rates keep rising, so do the number of borrowers in default.
Only 4 in 10 borrowers are currently paying toward their student loan debt.
Many of these borrowers are still in school, in a program to help make
such payments, or in a grace period. Parents over 60 are growing in numbers
carrying such debt. Experts warn such debt could restrict the growth of
the economy due to borrowers having limited purchasing abilities due to
budget constraints.
Reference:
http://www.huffingtonpost.com/2013/08/20/bankruptcy-student-loans_n_3782816.html