Students loans – will they become dischargeable?
Possible relief for students may be on the horizon.
Depending on the report you read it is estimated that there are up to approximately 1.2 Trillion Dollars in outstanding student loans. Many of these loans are not owed to the United States Government, but rather they are owed to private institutions and private lenders.
Prior to 2005, only federal government loans were protected from elimination in bankruptcy but private loans could be eliminated. In 2005, the bankruptcy code was changed to make student loans very hard to eliminate in a bankruptcy. Specifically, any distinction between federal loans and private loans was eliminated.
But that may soon change. Illinois Senator Dick Durbin recently introduced a bill to reverse the 2005 changes to the bankruptcy code regarding student loans. The bill has 11 co-sponsors. While the bill is far from law, it is at least an attempt to address this issue, and worthy of being monitored.