Student Loans & Bankruptcy
Student Loan Borrower Assistance has some great critique on the recent Senate Judiciary Committee Subcommittee on Administrative Oversight and the Courts, “The Looming Student Debt Crisis: Providing Fairness For Struggling Students.” The hearings concentrated on the “mystery” of bankruptcy rules (2005), private student loan industry, and for profit schools. The hearings are way too narrow, as generally, student loans can be difficult (although not impossible) to discharge in a bankruptcy. Moreover, the hearing’s narrow focus is disappointing for those student loan borrowers strapped with ballooning balances resulting from capitalization interest, and are either unemployed or underemployed, and forced into forbearance (and interest accrues and accrues…)
The hearings are part of the S.1102 “Fairness for Struggling Students Act of 2011” bill that Sen. Durbin introduced last May. Related to the hearings is the recent Fitch Rating (March 22, 2012) on default rates and the February 7, 2012 National Association of Consumer Bankruptcy Attorneys (NACBA) report Student Loan Debt Bomb.
Neither the NACBA report or the “Looming Debt” hearings mention capitalization and its influence on overall debt servitude and usury. (Ms. Danielle Jokela, a student loan borrower that offered testimony at Looming Debt, mentioned “compound” interest in passing but the Committee didn’t follow up with questions).