The Law Offices of Kenneth E. Lindauer
Call today for free initial consultation

Feds support current bankruptcy rules on federal student loans

The federal government is sending mixed signals about whether or not it supports the repeal of bankruptcy legislation that, as it stands, prevents a Boston-area debtor from getting debt relief from student loan debts in most circumstances.

Basically, the current Administration sees an important distinction between student loans that are funded by private banks and student loans directly backed by the federal government. In the first case, the government is fully supportive of people being able to eliminate debt on those loans through the ordinary bankruptcy process. It recently announced that the bankruptcy law enacted in 2005 that prevents the discharge of private student loans should be repealed.

However, with respect to those loans that the federal government guarantees, the administration believes that a discharge in bankruptcy should remain relatively difficult to obtain. The government believes that federal loans offer struggling debtors other forms of protection. These protections include the availability of income-based repayment plans. The administration also points out that federal student loans are not underwritten like private loans, making them available to more students. Consistent with this position, the government argued against allowing a debtor, currently at retirement age and unemployed, from discharging $246,000 in student loan debt.

The discharge of student loan debts will likely remain an important political issue throughout this upcoming election year with the dollar value of student loans ballooning. In the meantime, Massachusetts debtors in the Salem area who have oppressive student loan debts may want to consider speaking to an attorney about their options.

Source: International Business Times, "Student debt: Obama Administration tries to block bankruptcy courts from reducing Education Debt," David Sirota, Oct. 19, 2015

No Comments

Leave a comment
Comment Information