The Obama administration has urged Congress to make it easier for individuals to discharge a portion of some forms of student debt by filing for bankruptcy protection. Although the bankruptcy option wouldn’t affect the vast majority of student debt, which is issued by the federal government, it would apply to the $150 billion (15% of all outstanding student debt) issued by private lenders like Wells Fargo & Co. and SLM Corp.’s Sallie Mae. The recommendation came in a report by the Education Department and the Consumer Financial Protection Bureau issued on Friday. As more and more people find themselves struggling under a mountain of unpayable debt, filing for bankruptcy in Oklahoma is becoming a more attractive financial move. If you are considering filing for bankruptcy in Oklahoma, contact our qualified bankruptcy attorneys at Oklahoma Legal Center today.
Supporters of Bankruptcy Option Call for Changes to 2005 Bankruptcy Law
Consumer bureau chief Richard Cordray says Congress should consider modifying a 2005 law that, except in rare instances, prohibits the discharge of private student loans through bankruptcy. “It would be prudent to consider whether they wish to modify the code in light of the impact on young borrowers in challenging labor-market conditions,” Cordray said. He also noted that the law doesn’t appear to have met its goal of bringing down the cost of borrowing and expanding access to private loans.
Expanding the bankruptcy option to federal student loans would be politically controversial, since it would likely result in adverse consequences like taxpayer losses. Also, private lenders warn that the proposed change could drive up interest rates on student loans, since the risk of losses would increase. They maintain that bankruptcy provides too big a temptation for students to simply walk away from their financial obligations because, unlike homeowners, most students lack major assets.
Contact an OK Bankruptcy Attorney for Help
Sallie Mae, the largest private issuer of student loans in the United States, said it would support a legislative change that would allow bankruptcy in certain cases. “Sallie Mae continues to support reform that would allow federal and private student loans to be dischargeable in bankruptcy for those who have made a good-faith effort to repay their student loans over a five- to seven-year period and still experience financial difficulty,” the company said in a statement. Despite the fact that many in the industry dispute this avenue of criticism, the report attributed some student-debt problems to what it called loose lending practices on the part of private lenders in the years leading up to the financial crisis. Unfortunately, a number of students in the U.S. are struggling with significant debt in the face of a serious, nation-wide financial crisis. If you have excessive student debt and you are considering filing for bankruptcy in Oklahoma, contact our skilled bankruptcy lawyers at Oklahoma Legal Center to discuss your legal options.