The “Private Student Loan Bankruptcy Fairness Act of 2010” was introduced in the House on April 15th and if passed into law, it could make it easier for debtors who have private student loan debt to discharge that debt in bankruptcy. Currently, it is nearly impossible for debtors to discharge their student loans in bankruptcy; but under the new law, private student loans (not federal student loans) would be treated like other unsecured debt during bankruptcy.
Many lenders oppose the new bankruptcy measure, however below we have listed three reasons why allowing a bankruptcy discharge for private student loans is good for America:
- Private student loans carry high interest rates which can be crippling for a young college graduate, especially one who is facing bankruptcy. Private student loan lenders really have no reason to charge high interest rates because since the loans are backed by the government they are basically taking zero risk when they issue the loans. Nevertheless, students are often burdened by these loans which quickly become too expensive to repay and dominate their budget.
- The high cost of private student loans is delaying important life decisions for many college graduates. Many delay purchasing a home, getting married, having children and even change which career path they take because of the high cost of private student loans. How many teachers, firemen and police officers are struggling with the high cost of private student loans? Giving these individuals the opportunity to relieve the burden of private student loans in bankruptcy can have a positive impact on our communities both socially and economically.
- It is unfair to allow other unsecured debt such as credit card debt to be discharged in bankruptcy while debtors who took out private student loans are forced to repay them despite any financial difficulties they are facing. Giving debtors the opportunity to discharge private student loan debt in bankruptcy will give them the better chance at getting a fresh financial start.