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Massachusetts students may face higher student loan rates

Those Massachusetts residents who are currently financing their college educations with student loans, or who plan to do so in the near future, should know that unless Congress acts soon, interest rates on future student loans will double from 3.4 percent to 6.8 percent, effective July 1, 2013.

As we have discussed on this blog before, Massachusetts students who are filing for bankruptcy generally cannot discharge student loan debts in a bankruptcy. These debts must be paid.

However, this has not stopped people from taking out student loans in order to get a college degree. In particular, during the downturn in economy, many people in Massachusetts and elsewhere who understandably could not get a job chose to return to school and had to take out loans in order to do so. However, when combined with unemployment or other financial challenges, student loan debt can quickly pile up.

While Congress could pass legislation that would prevent the sharp hike in interest rates, neither party has made a specific proposal in its budget that would do so at this time.

Massachusetts residents need to plan accordingly for what at this point looks like an inevitable and substantial interest rate hike on those student loans issued after this summer.

For those Massachusetts residents suffering under the burden of student loan debt, bankruptcy may be able to afford some relief to that person, even if he or she cannot discharge the student loan debt itself. For example, a Chapter 7 bankruptcy can eliminate debts other than the student loans so as to free a person's finances up so that he or she can make payments on the student loan. Similarly, a Chapter 13 bankruptcy can provide a reasonable payment plan under which he or she can catch up on delinquent student loan payments.

Source: NewsChannel 10, "Student loan interest rates set to double July 1," Philip Elliot, March 28, 2013

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