Like most Americans, Oklahomans often equate the pursuit of higher education to the pursuit of a better life for themselves and their families. But recently, the cost of higher education, which rose 15% between the years 2008 and 2010, has become a huge problem for many, and the words “higher education” have become synonymous with crippling student loans and large amounts of debt. Because of this reality, the United States Senate proposed a new bankruptcy reform aimed at addressing this issue. Here is what it could mean for students in Oklahoma.
The Situation with Student Debt and Bankruptcy
Young people who have graduated from college are being forced to make life decisions which are based not on the dreams and desires they once hoped to realize, but on their immediate ability to make their student loan payments. This situation often means forgoing further education, delaying marriage and family and taking jobs that pay more money but are completely unrelated to their fields of study.
The situation is even more severe for families who have taken on debt during this latest period of economic hardship in order to provide their children with educational opportunities. For the first time, the amount of consumer debt for educational purposes ($1 trillion) has surpassed credit card debt, and many families are paying off student loan debts the size of a second mortgage.
Unlike other forms of unsecured debt, student loans cannot be discharged under bankruptcy. This has been the case for both federal and private student loans since the 2005 bankruptcy reforms exempted private student loans from being discharged. The result is $300 billion dollars of student loans that are now considered “sub-prime” and unlikely to be repaid. A debt this size presents a huge threat to an economy still struggling to get back on its feet after years of recession.
To address this issue, the United States Senate is mulling over a new law that would allow the discharge of private student loans in the same manner that other unsecured debts, such as credit card and medical bills, are discharged.
Federal student loans have been non-dischargeable since 1978 as a way of protecting taxpayers’ money. Federal student loans make up more than 80% of all student loans and come with more favorable lending terms than private loans. However, there is a limit to the amount of federal student loans a student can undertake. In order to bridge the gap between the cost of education and the money available from federal loans, students must look to private loans, which typically carry less favorable repayment terms and higher interest rates. The hope is that by making private student loans dischargeable again, private lenders will be influenced to offer better rates and more flexible repayment terms.
What this law will mean for students and families in Oklahoma is better loan options in the future. Likewise, for the 37 million people across the nation who are repaying student loan debt, 14% of which are past due, the change will offer a chance at relief for those in financial distress and a fresh financial start for those who need it the most.
Free Consultation: Oklahoma Bankruptcy Attorneys
To find out more about how to file bankruptcy successfully in Oklahoma, contact a Oklahoma City bankruptcy attorney. For a free confidential consultation about your rights in bankruptcy court and the potential benefits of filing bankruptcy, contact the Debt Line Law Office at (405) 563-7888. If you prefer e-mail, send us your question using the form at the top right of this page and we’ll answer your question as soon as possible.