According to Student Borrower Protection Center, most private student loans can be discharged in bankruptcy. “People refer to [private education loans]…as a private student loan — but many of these loans are not actually the specific type of private student loan that faces extra barriers to discharge in bankruptcy.” The reason that more student loan borrowers haven’t pursued discharging private student loans in bankruptcy is not because of “undue financial hardship.”
The report states that student loan servicers have misled student loan borrowers in choosing alternative student loan repayment options when bankruptcy may have been the best choice. For example, according to the report, these loans are dischargeable in bankruptcy: bar study loans; career loans at nonaccredited schools; and direct-to-consumer loans.
First, discharging student loans in bankruptcy is possible, but it’s a tall order. In most cases, a student loan borrower has to prove undue hardship. Second, the report shows that lawmakers should regulate student loan servicers who misrepresent a student loan borrower’s ability to discharge student loans in bankruptcy. Third, if you’re struggling to make student loan payments, you should determine if bankruptcy is a viable option for you. Fourth, you should explore alternative options such as income-driven repayment plans, which base your monthly payment on your discretionary income and family size. Fifth, you shouldn’t expect wide-scale student loan cancellation in the near-term. Plus, temporary student loan forbearance is scheduled to end soon. So, make sure you understand all your options for student loan repayment.
There are many people who want to fasten tight onto the average person and make money from them. It might be those gurus who are raking in large fees from the book sales and media blitzes and whatever else they do to keep the hope hype going.
But at least they do have some points. If you keep putting money on a regulation basis into safe investors, you’ll make more money through the fiscal grace of compound interest. You will eventually have more, although it’s not the same as the days when people got real pensions and the invention of the 401(k) was about adding some additional savings on top, not self-funding one’s golden years.
