Student Loan Debt Crisis: Light at the End of the Tunnel?

For an increasing number of students, it’s a hard but inevitable lesson: getting through college without incurring student loan debt is no longer an option. Aaron Kase (Lawyers.com) provides context:

“In 2010, the average student graduated with $25,250 in debt, and the total student debt in the nation currently exceeds $1 trillion dollars, more than the total credit card debt. As college tuitions continue to rise above the rate of inflation and most jobs require a diploma, the youth of today are left in an unenviable position.” 

But there may be a light at the end of the tunnel for students (and their parents). Three lights, in fact, coming from the three branches of the federal government:

1. New legislation:

U.S.Representative Steve Cohen on the bill he introduced in Congress to allow individuals to discharge private student loan debt in bankruptcy. The Private Student Loan Bankruptcy Fairness Act would restore US Bankruptcy code provisions that allowed individuals with private student loans the possibility to discharge, effectively reversing a 2005 change in the law. (Bloomberg Law) 

2. New regulations:

“Recent remarks by Rohit Chopra, the CFPB’s Student Loan Ombudsman … could presage new CFPB student loan recommendations to Congress or even CFPB examinations, investigations, and/or rulemaking proceedings. After describing the plight of ‘underwater student loan borrowers making high monthly payments [who] are often unable to modify or refinance their loans,’ Mr. Chopra discussed ‘lessons from the mortgage market’ that might be applied to student loans.” (Ballard Spahr) 

3. New judicial rulings:

“… the U.S. Court of Appeals for the Second Circuit held that a debt collector’s representation to a debtor that her student loans were ‘ineligible’ for bankruptcy discharge is a ‘false, misleading, or deceptive’ debt collection practice in violation of the FDCPA.” (BuckleySandler) 

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The updates:

• Chopra student loan remarks could signal new CFPB proposals or actions - Ballard Spahr LLP 

• Second Circuit Applies “Least Sophisticated Consumer” Test In Student Loan Debt Collection Case - BuckleySandler LLP 

• Congressman: Fix The Student Debt Crisis With Bankruptcy Reform [Video] - Bloomberg Law 

• Uncle Sam Docks Social Security to Reclaim Student Loan Debt - Lawyers.com 

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Further reading:

• Second Circuit to Student Loan Collectors: Know Your Bankruptcy Law! - Ballard Spahr LLP 

• CFPB Corrects Student Loan Report - BuckleySandler LLP 

• Reduce Student Loan Debt in Niagra Falls, New York - Frank Pipitone 

• Whew! CFPB reanalysis of student loan data doesn’t change findings and recommendations (but CFPB’s description of reanalysis changes) - Ballard Spahr LLP 

• Can I Get Rid of Student Loans in Bankruptcy? - Kevin Johnson 

• Student Loan Requirements Are Constantly Changing - David R. Black’s Bankruptcy Legal Group 

• Oops: CFPB reanalyzing data in private student loan report - Ballard Spahr LLP 

• Feds Go on the Offensive: Social Security and Federal Student Loans - Jeff Field & Associates 

• Income-Based Repayment on Student Loans - Harold Shepley & Associates, LLC 

• Consumer Financial Protection Bureau Shaking Up Private Student Loan Industry - Saul Ewing LLP 

• Back to School: Student Loans & Bankruptcy - John Skiba 

• CFPB Releases Report on Private Student Loans, Testifies in Senate - BuckleySandler LLP 

• CFPB issues student loan report and launches online tool for problem student loans - Ballard Spahr LLP 

• Student Loans and Bankruptcy: The Uphill Climb to Eliminating Your Student Loan Debt - Jeff Field & Associates 

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