Under their proposal, any education loans issued to students by private financial institutions would be treated like any other unsecured debt in a bankruptcy proceeding. This would be in contrast to the current situation, where student loan debt – public or private – is nearly impossible to erase in a bankruptcy proceeding.
Of course, in an individual Chapter 11 bankruptcy, debtors are required to submit a plan that provides for all of their disposable income, over a five year period, to be available to pay their unsecured pre-bankruptcy debts
. Nevertheless, under the new proposal in the Senate, the end result after five years of such payments would be that the remaining student loan debt would be discharged.
At the present time, total student loan debt exceeds $1.2 trillion dollars. Of this amount, $165 billion stems from private lending sources, according to Fortune.
The proposal in the Senate would therefore help only roughly ten (10%) percent of the outstanding amount, but would provide a starting point.
According to Fortune
, the lending industry’s primary trade group, the Consumer’s Bankers Association, responded to the President’s proposal by suggesting that lawmakers instead address the rising cost of college.
Are you a student or a working professional who is dealing with debt procured during college? Let me just tell you that you are definitely not alone, there are millions of Americans older and younger than you dealing with the same issue.What's your experience like dealing with student loan debt? Feel free to share your thoughts and feelings in the leave your comments in the section below.