May 9, 2012
By: John Clark**ShareNewsLinks**
The federal government should amend U.S. bankruptcy law to allow students to more easily eliminate their student loan debt in bankruptcy court, according to an argument in the latest U.S. News & World Report made by a former policy adviser with the Department of Education.
In the opinion of Amy Laitinen, who currently serves as a senior policy analyst at Education Sector, high levels of student loan debt are threatening to disrupt the economic recovery, and the Obama Administration should tweak bankruptcy laws to allow an easier path for student loan relief.
Under current bankruptcy laws, consumers may discharge student loans in bankruptcy only if they meet certain limited eligibility requirements that show they would suffer an undue hardship if they were forced to repay their loans.
Granted, some filers still choose to seek bankruptcy protection in order to shed other debts, thereby freeing funds to repay student loans, but this option has its limits.
The student loan crisis has prompted serious attention from both the Obama administration and Congress, who are working together to craft some kind of solution for the problem.
However, according to Laitinen, a current proposal that has the government spending $6 billion to keep the interest rate for federally subsidized Stafford loans at 3.4 percent for an extra year is both costly and inefficient.
In Laitinen’s opinion, this “solution” does not solve the problem of high interest rates associated with private student loans, which are usually much more expensive than loans that are subsidized by the government.
According to Laitinen, instead of patching the problem with short-term solutions, the government should amend bankruptcy laws so that students could discharge private student loan debt in bankruptcy court.
In her view, this solution would not sink private lenders. On the contrary, it would force private lenders to be more selective in their loan-making decisions, while offering a lifeline for students who are already susceptible to predatory lenders.
In response, some critics might argue that such actions would limit many potential students’ access to education loans, but this gap could theoretically be filled by an increase in government assistance.
This debate will likely rage for years, but both sides can agree on one thing: after passing the $1 trillion mark earlier this year, student loan debt became a massive problem, and one that urgently needs to be addressed.
PAID ATTORNEY ADVERTISEMENT: THIS WEB SITE IS A GROUP ADVERTISEMENT AND THE PARTICIPATING ATTORNEYS ARE INCLUDED BECAUSE THEY PAY AN ADVERTISING FEE. It is not a lawyer referral service or prepaid legal services plan. Total Bankruptcy is not a law firm. Your request for contact will be forwarded to the local lawyer who has paid to advertise in the ZIP code you provide. Total Bankruptcy does not endorse or recommend any lawyer or law firm who participates in the network nor does it analyze a person's legal situation when determining which participating lawyers receive a person's inquiry. It does not make any representation and has not made any judgment as to the qualifications, expertise or credentials of any participating lawyer. No representation is made that the quality of the legal services to be performed is greater than the quality of legal services performed by other lawyers. The information contained herein is not legal advice. Any information you submit to Total Bankruptcy does not create an attorney-client relationship and may not be protected by attorney-client privilege. Do not use the form to submit confidential, time-sensitive, or privileged information. All photos are of models and do not depict clients. All case evaluations are performed by participating attorneys. An attorney responsible for the content of this Site is Kevin W. Chern, Esq., licensed in Illinois with offices at 25 East Washington, Suite 400, Chicago, Illinois 60602. To see the attorney in your area who is responsible for this advertisement, please click here, or call 866-200-8052.
FLORIDA ONLY: Total Bankruptcy is considered a lawyer referral service in the state of Florida under the Florida Rules of Professional Conduct. By all other standards, Total Bankruptcy is a group advertisement and not a lawyer referral service.
If you live in Mississippi, Missouri, New York or Wyoming, please click here for additional information.
By an Act of Congress and the President of the United States, we are a federal Debt Relief Agency. Attorneys and/or law firms promoted through this Web site are also federally designated Debt Relief Agencies. They help people file for relief under the U.S. Bankruptcy Code. Disclosures Required Under the U.S. Bankruptcy Code.