What President Obama is Doing about Student Loans
Bankruptcy | May 5, 2015
On March 10, 2015, President Obama signed a Student Bill of Rights, and in a signing ceremony at Georgia Tech University he explained the ways in which this bill will ease the pressures of student loan debt: “We’re going to require that the businesses that service your loans provide clear information about how much you owe, what your options are for repaying it, and if you’re falling behind, help you get back in good standing with reasonable fees on a reasonable timeline.” This is welcome news to the 40 million Americans who now bear the burden of at least one student loan.
What Changes Can You Expect From the Student Bill of Rights?
President Obama’s bill will not immediately result in large-scale changes in the student loan landscape. The bill is a list of proposed action items, and while some of these will begin to take effect right away, others require legislative and regulatory approval. The bill requires the U.S. Department of Education to create a centralized database for complaints, where your feedback about abusive lender practices will be made public and will have negative effects on whether that lender is allowed to continue offering student loans. There will also be a centralized information network through which all borrowers can see the status of all their student loan accounts and payments.
Lenders will be required to communicate clearly with you, and provide you with timely, understandable options for understanding and changing your repayment schedule. As a borrower, you will be told exactly which lender currently holds your loans, and when you make a payment it must be applied to the loan with the highest interest rate. Finally, the bill will increase students’ access to programs which tie monthly loan payments to income, and it will increase access to information about discharging student loans in bankruptcy due to hardship and/or disability.
How Do These Changes Affect Bankruptcy Filings?
Our Morgan & Morgan attorneys in Athens, GA are pleased by the improvement in communications which this bill will require. By July 1, 2015, the Department of Education will be required to provide information about specific reasons that courts have used when they have agreed to discharge student loans in the course of bankruptcy proceedings. Students who experience undue hardship in repaying student loans do have options under current bankruptcy law, but far too often they don’t realize that these options exist. Furthermore, if an institution (such as a for-profit college) goes out of business and does not permit the student to complete their program, the student may be able to cancel their student loan debt. Disabled borrowers who qualify for SSDI (Social Security Disability Insurance) have new options for cancelling their debts, and these options will be more clearly communicated. Finally, even if you can’t eliminate your student debt, you can get help to make sure your payments stay at a manageable amount of your monthly income.
To learn more about student loan options in your personal situation, contact a knowledgeable and supportive Morgan & Morgan attorney in Athens, Georgia.