Ideas on Discharging Student Loans in Bankruptcy

Ideas on Discharging Student Loans in Bankruptcy

In a recent article in Forbe’s magazine, writer George Leef, proposes allowing former students to discharge student loans in bankruptcy as long as the colleges the students went to agree to pay back the loans.  I believe this is something that the universities and colleges around the country will roundly say no to.

Secondly, it goes to the heart of a major criticism of the current student loan regime.  Some suggest that in search for dollars school accept anyone and everyone. These folks then obtain federally guarantee student loans which go to pad the bottom line of these institutions. Isn’t it time that these schools bear the cost of letting everyone in?

The author thinks that schools would think twice about accepting student loan money from an individual who is unlikely to excel in the future and thus have the ability to pay back the loans if they bore the risk of paying back the debt. I can only imagine schools refusing to accept students whose only means of payment would be student loans because of the risk involved. This may have the adverse effect of keeping economically disadvantaged students regardless of potential out of the a college education.

Other ideas include that of Senator Elizabeth Warren who has suggested allowing students to refinance their loans at low-interest rates and as her profile in the campaign trail rises this idea may get more traction.

The debate is only heating up and ideas such as these are just starting to get serious consideration. We also have a divided congress so a deal is probably far from happening, but there is hope when ideas starting getting coverage in major publications that we are on the right track.

 

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