Consolidating student loans bankruptcy
These procedures apply to both federal and private student loans and exist outside the traditional bankruptcy process.Congress made federal student loans ineligible for discharge to ensure the solvency of the federal loan program. If you decide to take out a loan, make sure you understand who is making the loan and the terms and conditions of the loan.
Proponents of keeping student loan discharge off the table argue that since borrowers had no collateral to pledge for their loans when they received them—other than future potential earning power—then their loans should be required to be repaid (as there is no other collateral to be acquired in its place).
For example, in many cases tuition had risen 2,000% from where it was in 1976 when student loans were still dischargeable.
At the same time, the average household income hasn’t increased since early 2000.
Federal student loans offer many benefits compared to other options you may consider when paying for college: Before you take out a loan, it’s important to understand that a loan is a legal obligation that you will be responsible for repaying with interest.
You may not have to begin repaying your federal student loans right away, but you don’t have to wait to understand your responsibilities as a borrower.
However, those that favor of reforms argue that the student loan crisis has reached such a degree that bankruptcy options should be adjusted accordingly to combat this worsening trend.