Student loan debt may soon be eligible for discharge in bankruptcy.

 Posted on April 09, 2013 in Bankruptcy

The Fairness for Struggling Students Act of 2013 would forgive private student loan debt when an individual files for bankruptcy protection. The bill, cosponsored by Sens. Dick Durbin (D-Ill.), Sheldon Whitehouse (D-R.I.) and Jack Reed (D-Ill.), would reverse 2005 legislation that makes it almost impossible to have private student loan debt discharged in bankruptcy.

According to an article in the Huffington Post, student loans total $1 trillion, or nearly $25,000 per borrower, on average, nationally, each year, yet they are the only loans not eligible for bankruptcy protection. Federal student loans have been protected from bankruptcy claims since 1978. However, those loans typically have lower interest rates, income-based repayment plans and more deferment and forbearance options. Like credit cards, private student loans typically have double-digit, variable interest rates that are highest for the people who can least afford them and have no income-based repayment options.

Sen. Durbin has previously introduced the bill in 2010 and 2011. “Young Americans are being hamstrung by record debt levels,” Durbin said. “Unless we take action to protect borrowers, student loan debt will be the next mortgage crisis.”

Organizations such as the Consumer Financial Protection Bureau, the U.S. Department of Education and the Institute for College

Access have all voiced their support for the bill. Sallie Mae, a major private student loan institute, has also said they are open to bankruptcy reform for student loans.

If you are struggling with loans and are having a difficult time financially, contact Texas bankruptcy attorney today to find out what legal options you may have.