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Could bankruptcy provide student loan debt relief in the future?

On Behalf of | Apr 2, 2016 | Chapter 7 Bankruptcy, Firm News

This is a question that thousands, if not millions, of college graduates here in Florida and across the nation might be asking themselves. Research indicates that the a crisis is brewing when it comes to student loans, which now total around $1.5 trillion nationwide. To make matters worse, it is nearly impossible to find student loan debt relief in the U.S. Bankruptcy Code. 

This is because Congress decided that college graduates were running to bankruptcy court after they graduated to discharge their loans. In retrospect, only approximately 1 percent of graduates actually filed bankruptcy in order to free themselves from student loan debt. Now, lenders have nearly unlimited power when it comes to collecting on this type of debt. In fact, in 2011, the U.S. Department of Education made approximately $50 billion in profit from student loans.

While companies make those kinds of profits, people are struggling to stay afloat, and many default on their loans. Default rates over the lifetime of these loans vary between 25 and 50 percent. Furthermore, even if a graduate is able to get back on track with payments, there is a 60 percent chance that he or she will default again. Fortunately, the tide seems to be turning in the political arena. There could be a time when people can once again discharge their student loans in bankruptcy.

Until that time, however, student loan debt relief remains out of reach. Bankruptcy could still be useful for many Florida residents who are struggling with this and other debt. Obtaining a discharge of other debts could free up the income needed to continue making payments on student loans.

Source:, “Column: College students deserve a right to debt relief“, Alan Collinge, March 20, 2016

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