Recently, President Obama made some speeches regarding student loan debt at various college campuses. At issue in many of his talks is that the current student loan interest rate for government backed loans will double from 3.4% this summer unless Congress takes action.
While a 3.4% interest rate is great for new and current students, it doesn't help the thousands of former students currently carrying an average of at least $25,000.00 in student loan debt - if not substantially more. Since 1998, federally subsidized student loans have been non-dischargeable in bankruptcy, except in extreme situations of death or disability. In 2005, private student loans were also made non-dischargeable. So, an individual swimming with a student loan that is the same size as a house note has no option but to continue paying.
Allowing individuals with high student loan to debt to use bankruptcy as an option - as an individual can in almost any other type of debt - would end some of the horror stories. Take the recent story of two schoolteachers that filed Chapter 7 bankruptcy. They lost their home and their car, but are still in dire financial straits due to their student loan debt.
Rep. Hansen Clarke introduced the Student Loan Forgiveness Act of 2012 in Congress recently. Hopefully, this proposed legislation will gain traction in Congress to allow those unable to manage student loan debt to have some option, like nearly every other debtor, to manage the debt and continue to live a normal lifestyle.
