Bill introduced to discharge private student loans in bankruptcy

[alyssa]

I have a lot to say but I'm not going to answer your sarcastic remarks.

This bill will make lenders think about how much they are allowing students to take out. Astrive has commercials on TV saying students can take out up to $40,000 per year. That is ridiculous and sets people up for problems. They make it seems they have the same benefits as federal loans when they do not. These loans are way too easy to get in the first place and they know in the end that students aren't going to be able to afford the payments. They need to be more strict with who they are giving money to.

If this bill passes it will drive more students toward government loans. I wish I knew all of this when I was in school, so if I help even one person then I will be happy.

The bottom line is that private student loans should be considered the same in bankruptcy as any other unsecured debt. Right now it is ranked with child support payments, taxes, and criminal fines! Make sense of that! It makes sense that federal student loans are on that level, but not those from private lenders that are worse than some credit cards!

[Minnymouth]

YEP, when you support something - you have to be prepared to defend it and stand up for it....... and have good reasoning.....or it won't hold "water"......

Note, that many of the cc companies raise your interest rate to 30% when you default or make a late payment on a different credit card. They have gotten so much "slack" on this that some have stopped the practice, and have sent out new clauses on their credit cards that they will no longer raise your rate due to delinquency on another account.......

A lot of companies their little "default" clause has cost them billions in the bankruptcy courts...... and now they are starting to "feel the pinch".....

But back to supporting a "bill in Congress" - stand up for it, fight for it, defend it, if you believe in it! That's how laws are changed and updated for the better of all........

[BKTango]

"I have a lot to say but I'm not going to answer your sarcastic remarks."


I think maybe you have me confused with another poster. At any rate, I was not making sarcastic remarks, sorry if you feel I did.

[Minnymouth]

As with credit card companies, student loans DON'T CARE how much they loan you, or how much credit you use........ they are only interested in their RETURN on their investment.......

Yes I agree, their should be a "cap" on loaning funds..............

If these loan companies, credit card companies KNOW that you are not financially able to repay above a certain dollar amount...............they should not be allowed to grant loans/credit for anything higher than what you can afford. There has to be a "realistic figure" that loans/credit is based on.....

Just because you want - doesn't mean you can afford!!!

Mortgage companies have set a cap..... you can only borrow up to a certain amount that your income can support..... no more than that..... If your pre-approved for a mortgage loan it is based on your present income....

Unfortunately, young people, new students fresh out of high school, are not aware of how "society" does their thing, especially the loan sharks of the world. And the sad part is few people offer their help in guiding these young folks in the right direction - thus they end up making bad decisions sometimes....

Same principal of not revealing all thats involve in the "interest only" mortgage loans that are out now, and the reverse mortgages that are available.... under "interest only mortgages" - you never have equity in your home till all the interest is paid....... and basically you never will own your home under the reverse mortage plan......

Lots of little clauses, laws, things that no-one teaches our young folks about and they learn from "trial and error".....

Sad situation........

Many of us had bad bankruptcy experiences because we didnt KNOW, or no one TOLD US, OR EXPLAINED what we were up against when we filed bankruptcy.....

That's 90% of the reason for this forum......... to help educate people regarding bankruptcy....

The same should be done for our young folks that want to buy homes, go to school, etc.............

You can't do the right thing, when you don't know what the right thing is!!!!

[alyssa]

yea I was referring to BKOnce... I saw the cap. BK and just responded! sorry about that!

[JollyGG]

I have to say I have never had a problem with the fact that my student loans are non-discharble because I took out federally backed student loans. They give so many flexable repayment options and work with you. I consolodated into a low interest rate several years ago when rates were good. Plus, like others have pointed out I got my degree, I enjoyed college, I have a job I love because of it, I met my husband at college. Those loans secured my future.

However, I agree that private student loans are an entirely different creature. They are essentially a unsecured loan with the name student in the title.

Mabey instead of changing how bankruptcy treats private student loans we need to look at how we define a student loan? Or outside of bankruptcy we need to better regulate any loan that is defined as a student loan, both in terms of quilifying for the loan and how the company must deal with creditors repaying the loan.

[alyssa]

JollyGG - That is exactly what congress is looking at right now and this happens to be one of the bills brought about because of everything going on and all of the problems in the student loan industry. There are other things going on, such as more disclosure to applicants, etc. The sunshine act is another bill and that looks at disclosure and gifts from private companies to student loan admins, etc. That bill either passed one or both chambers.. I can't remember at this exact minute, but it was in the past month.

[JRScott]

Recently I had a lesson I taught at church. It was in June I think. I made a point to caution those in college to only take loans for needed amounts, not to take more than needed to pay tuition and books. I warned them of the costs of high student loans and the fact they could not be discharged in a bankruptcy except in extraordinary circumstances.

The predatory lending of the 'private' student loan lenders is really no different than the credit card companies, rent to own places, etc. I am glad to hear they are taking another look at this aspect. The no discharge in bankruptcy is what is leading so many of these companies to loan out as much as they can to whoever, because they know they can siphon the money out of that person forever.

What we really need is a debt limit. I mean before declaring bankruptcy my unsecured debt was nearly twice my annual income. There was no reasonable way to pay that back. We need stricter limits on how much credit card debt a person can accumulate. The problem is that the government has taken care of its own books and we as a nation are going to pay for it in the next two decades. So the trouble becomes how do they impose what needs to be done when they themselves have not managed what they have well.

[Minnymouth]

QUESTION???

Wonder if there has EVER been an audit done on the Federal Government???

Have they EVER been forced to BALANCE THE BOOKS..... HAVE AN ACCOUNTING??

Would be very interesting to see!!!!

[lrprn]

Hopefully Congress will do a better job with this bill than they did passing the new bankruptcy law in 2005. At least some of our congressional reps are starting to understand this dark hole they've created.

One of the biggest issues I have with student loans in Ch 13 bankruptcy is that according to the current BAPCPA law, neither govt or private student loans can be discharged. Ok, those are the rules - fine.

However, in Ch 13, both types of student loans are also considered to be non-secured loans like a credit card in most bk districts. That means in those districts (ours happens to be one of them) you can't add them to your plan to pay them monthly unless you can pay them off at 100% by the end of your plan.

So much is typically owed on student loans that to pay them at 100% puts the monthly Ch 13 payment required at such a high level almost no filer can pay it. Most are forced to put their student loans into forebearance for the length of their Ch 13 because there's no other option.

So a Ch 13 filer is stuck with student loans they can't discharge but can't pay on either. For three to five long years, the student loan lenders (government and private) rack up interest while you are prevented from making payments because all your disposable income is going to pay all your creditors that file claims EXCEPT for your student lenders every month. What's fair about that??? Talk about double-jeopardy!!

[alyssa]

I was talking to a lawyer about possibly doing that, but it would be impossible without a whole lot of help and a few extra jobs. It would be nice to get everything paid in 5 years though. The lawyers I spoke with didn't have a lot of knowledge on how student loans work in bankruptcy. They knew you can't discharge them, but they weren't sure how it would work in ch 13. He mentioned he could possibly say that no interest should accrue during the repayment... but he also said he didn't know if that was allowed. Does anyone know? I am really desperate to figure something out. I have been calling and writing senators but without a lot of help that bill will go no where and I can die before something like that is passed. I just don't know what to do. I am only making partial payments on each loan so they are bound to catch up with me and I will eventually default? This whole thing makes me sick...

[treehugger1]

lrprn,

There is a paradox with SL's as mentioned elsewhere. If they are large and deferred until after the 5 years, and if they are a decade or more older then they have 7 - 9% interest rates (after consolidation, in many cases). With that kind of rate, a debtor can come out of a 13 in no better shape then they went into it. There are ways to "rehabilitate" (I think that's the word for it) defaulted loans, and I'm attempting to research this. I am not in default, but I am making sure my ~$600 month payment is paid to the SL before any other unsecured creditor.

[Minnymouth]

I have to agree that for a student loan to set idle for 5 years acruing interest SUCKS.............. that's 5 years of payments that could be made if allowed in or outside the plan......

I can see where that would really make it difficult for a student to get them paid off anytime soon.....

On a $100K loan, you could make payment of $1k a month and still not have it paid off in 10 years or so because of the interest, etc....

Man, talk about a "catch 22" - THEY "GOTCHA"..............

[alyssa]

That's exactly why I am calling and writing these senators... The student loan system is seriously flawed and since they are focusing a lot of attention on education and reauthorizing the higher education act, now is the time to get things done. Especially with all of the fraud going on with the major companies and student loan admins. Some might think it is silly, but writing and calling does bring attention to it because then they know their constituents care about certain issues. And at this point I really have no other options!! I'm about to write Oprah! ha.

[CurtInKS]

This is a fascinating debate, because the truth is, the only people who can go to school, and finish their education with a clean slate are those wealthy enough to pay out of pocket, or poor enough to have it paid for. That doesn't seem entirely fair, to me. The middle is left out.

The reason student loans are no longer dischargable(per my attorne), is becuase doctors and attorneys would complete school, and immediately file, getting rid of all that debt, and then starting their practices.

I look back and my education and laugh, because I had friends who were applying for credit cards, to pay for books and tuition, and I was taking out student loans. Many of them filed for bankruptcy after school, and had them discharged, while I am stuck. The system, IMO, is flawed. Someone borrowing more money than they need, for financial aid, while they are in school, IMO, is no more irresponsible than they person who racks up huge credit card debt for frivolous purchases. It's hypocritical that one can get a clean start, and the other cannot, IMO.


My student loans were taken out, to live on, so I could finish school, and so my ex-wife could finish school. It was a horrible mistake in judgement to take out additional loans for my ex-wife to go to school, but now I am stuck with all those loans. Such is life. I want no sympathy for it. Do I consider the current BK laws fair and equitable? No, but it is what it is.