The National Association for Consumer Bankruptcy Attorneys (NACBA) is pushing to have the bankruptcy code revised to change the way student loans are being treated according to a recent report by Reuters. The bankruptcy group feels that college graduates should be allowed to get student loans discharged; an argument that is being presented to Congress but not for the first time.
Parents, as well as students, have also been struggling with student loan debt. NACBA reports their usage has increase by 75 percent since 2006. Congress has recently been presented with 2 bills: the House’s Private Student Loan Bankruptcy Fairness Act and the Senate’s Fairness for Struggling Students Act and if successful as least student loans from private vendors may be eligible for discharge.
Forbes reports that in 2011, the amount of outstanding student loans climbed over 1$trillion. The amount has surpassed the estimated amount of credit card debt at $800 billion. NACBA feels that borrowers may suffer even more if the exemption for the loans to be discharged doesn’t change. The bankruptcy group claims that since private loans have no limits on interest fees or rates, it makes the situation more challenging for borrowers to repay since these types of loans have limited options for repayment.
Student loans were dischargeable at one point up until 1976. In 2005, the bankruptcy code was revised again but unless a borrower can prove a significant or undue hardship, their student loans can’t be discharged. Experts look at the situation and feel student loans are being put into the same category as criminal fees, child support and other non-dischargeable debts.