- February 6, 2015
- Thomas Adam
- Student Loans
Will Student Loan Relief Soon Be Available in Bankruptcy Proceedings?
John Delaney hopes so. Not the University of North Florida President, but a US Representative from Maryland by the same name. Delaney filed a bill (H.R. 499) that would provide student loan relief by removing student loans from the bankruptcy code’s list of non-dischargeable debt in 11 USC 523.
Current State of Student Loan Bankruptcy Law
As discussed in earlier blogs, student loan debt is currently considered non-dischargeable, which means unlike other debts, like car loans, the debtor remains liable for it after going through bankruptcy proceedings. There are a few exceptions where student loan debt may be discharged, namely in cases of undue hardship (requiring almost an extreme hardship) and where the education institution attended is deemed unqualified. However, under current bankruptcy law, student loans are one of the few things in life that are in fact forever.
The Growing Need for Student Loan Relief
College tuition has been rising at a staggering rate, rising approximately 7.45% per year between 1978 and 2011 and recent studies show it continues to rise. For comparison, the rise in the cost of healthcare over the same period was approximately 5.8% per year. As costs have risen so has the necessity of college degrees for gainful employment. During the recession the unemployment rate for those with four year degrees was consistently much lower than the general unemployment rate.
Naturally, as tuition and the need for a degree have risen, so has the amount of student loan debt. In 2013, nearly 70% of college graduates of public and non-profit colleges had student debt and the average amount? $28,400. Keep in mind that many go on to graduate degrees where the debt increases at a nearly exponential rate. For many, student loan debt is a significant portion of their overall debt and it is an obligation that some just cannot meet while providing for themselves. In 2012, 35% of student loan carriers under the age of 30 had been late on at least one payment.
Dischargeable Student Loans, a Step in the Right Direction
There is a clear need student loan relief to prevent another debt epidemic. Allowing student loan to be discharged like all other debts won’t solve the entire problem, but it is a step in the right direction. The current categorization of student loans as non-dischargeable is simply unfair. As Delaney pointed out, “it doesn’t make sense for students with heavy debt burdens to be worse than someone with credit card, auto loan debt or mortgage debt.”
In fact it seems to create a disincentive towards obtaining educational loans, loans that allow many to attend college that wouldn’t otherwise be able to. Education in turn is essential to the continued success of individuals, families, and the country as a whole.
Wondering About Your Loans?
To learn more about student loan relief and bankruptcy, contact the experienced bankruptcy attorneys at Adam Law Group and continue to check our website and blog for updates on changes in bankruptcy law as it related to student loans.