• Congress Proposes Legislation to Allow Private Student Loans to be Dischargeable in Bankruptcy

    A poor economy and high student loan balances are financially crippling recent graduating classes. Estimates claim that the average debt for a 2009 bachelor’s degree recipient is $24,000. Those who have obtained advanced degrees are most likely to carry even more debt.

    A recent study by the John J. Heldrich Center for Workforce Development at Rutgers University has found that only 56 percent of 2010 graduates have been able to find employment. Major newspapers have reported that the total amount owed in student loans in 2010 is greater than credit card debt. Total student loan debt is expected to exceed $1 trillion in 2011.

    Many student loan borrowers are unable to repay their loans under these circumstances.

    Senators have introduced the Fairness for Struggling Students act of 2011 in the U.S. Senate, and representatives have introduced the Private Student Loan Bankruptcy Fairness act of 2011 in the House of Representatives. Both bills would restore the ability to discharge commercial student loans in bankruptcy.

    Senator Dick Durbin’s office issued a press release explaining the bills: “Before changes were made to the bankruptcy code in 2005, only government issued or guaranteed student loans were protected during bankruptcy. This protection has been in place since 1978 and was intended to safeguard federal investments in higher education. Today’s bill would restore the bankruptcy law, as it pertains to student loans, to the language that was in place before 2005, so that privately issued student loans will once again be dischargeable in bankruptcy.”

    Benjamin Brand Services – Chicago bankruptcy attorney