Hoping to Ease Student Debt, Legislators Propose New Laws for Bankruptcy in Atlanta, U.S.
The last time Congress rewrote bankruptcy laws, it was to prohibit students from using bankruptcy to escape education loan obligations.
Now - in light of a $1 trillion student loan bubble - legislators are discussing the possibility of reversing that position, reports The Wall Street Journal.
Back in 2005, the government prohibited the discharge of student debt through bankruptcy, except when someone faced an undue hardship such as a physical disability that prevented the person from working, because of fears that students would simply walk away from their loans.
Since then, tuition has skyrocketed while enrollment has increased, resulting in a steadily growing student debt burden far larger than Uncle Sam could have predicted.
Between 2000 and 2010, the average student debt load surged 24 percent to more than $16,000. Students who attend private schools often carry balances of $100,000 or more.
Not only is the burden impacting the debt holders, but it's also threatening the stability of the entire economy.
With jobs scarce, many recent graduates have been unable to find well-paying positions - or in some cases, any job at all. In the past decade, earnings of young workers with a bachelor's degree have fallen 15 percent.
Many young adults are holding off on taking out car loans, buying homes, or making other economy-stimulating purchases.
These days, it's not a matter of whether students will choose to make good on their promises, but whether they will be financially able to make good on their promises.
By allowing bankruptcy in Atlanta and other regions to help students most in need, some politicians hope to stave off what's seen as the next big economic bubble.
Of course, even if a bill is approved, it will only apply to private student loans - not the government-backed loans that account for 90 percent of student debt. With as many as 27 percent of borrowers already delinquent on school loan payments, it may be too little too late.
By lightening the overall load, bankruptcy can make it possible for young consumers to begin heading down the path to a brighter financial future.
To speak with an Atlanta bankruptcy attorney about how bankruptcy might help your financial situation, call the DebtStoppers Bankruptcy Law Firm at 800-440-7235 now for a complimentary debt analysis. Call 800-440-7235.
More Blog Entries:
Trying to Shed Student Debt, by Josh Mitchell, The Wall Street Journal