Student Loan Debt Crisis

Although a bankruptcy discharge can provide a much needed fresh start, there is one type of debt that nearly always survives, preventing the true ability to start over: student loan debt. Under the current law it can be extremely difficult to discharge student loan debt in bankruptcy, and because the lenders usually fight tooth and nail to prevent the discharge, any attempt to discharge the debt usually requires costly and lengthy litigation. For individuals living in poverty, every dollar counts and all types of debt are overwhelming barriers. We help those most in need file bankruptcy so they can take control of their finances and move out of poverty, but with the current law our clients with student loan debt cannot truly overcome all debt. Quite simply, there needs to be an easier way to discharge student loan debt.

On Tuesday the President announced a proposed Student Aid Bill of Rights, which includes some improvements, including a new website for consumers to file complaints about lenders, servicers, collection agencies, and schools;  a simple one-stop access point to  review account and payment information for all loans, no matter which debt collector or servicer you actually pay; and assurances that borrowers who receive SSDI, and therefore may be eligible to discharge the loans through the disability discharge, do not instead see their disability payments garnished to pay defaulted loans. While the President’s proposal provides some hope for borrowers, it does not go far enough.

Senator Warren urged the Department of Education to act “to ensure that our most vulnerable young people struggling with the burden of federal student debt have meaningful opportunity to build a strong future for themselves and their families.” We also need Congress to work together to protect our most vulnerable by changing the bankruptcy laws to allow a fair process for individuals most in need to discharge student loans in bankruptcy.

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