Congress easing Student Loan Burdens – How will you see it?

Education is getting lot of attention from Obama government, every other day we hear about different reforms that have been or will be implemented. Lately Student Loan policies by federeal government have created quite a stir. We thought like dedicating our newsletter for April 2010 for the new reforms in student loan repayment policies.

The changes in the new law that should ease student loans burdens are projected to save the government $61 million. Washington reports, student and their families should find the student loan process simpler and lower income students should find more financial help under the sweeping changes tucked into health care legislation that Congress passed this week.

Reform is needed to help students finance education

Rep. Trent Franks, R-Ariz., the House Judiciary Committee’s ranking minority member said reform is needed to help students finance education, he is wary about the bill’s impact on the industry, fearful such loans would be unattractive to investors when bundled into securities.

“If lenders are forced to scale back student lending because private student loans are subject to bankruptcy discharge, many students will be denied access to higher education,” Franks said.

Decrease in Student Loan Repayment

At present student with large student loans and low incomes do not have to pay more than 15 percent of their earnings each month to pay off their student loans. However, with the new law student will only have to pay 10 percent each month on their loans.

Filing for Bankruptcy will not Discharge your Student Loans

Many people think that if they file for bankruptcy, they will be able to get rid of all debts.
Unfortunately this is not the case. Under the current bankruptcy laws, filing bankruptcy will not discharge your student loans obligations, you still have to pay back your student loan debts. Even if you discharge all you other debts, student loan debts are non dischargeable and you will still be stuck with your student loan payments.

Exception to the Bankruptcy Rule

The only exception to this rule is if the student debt will cause you undue hardship and this has to be proven. To prove that you are going through undue hardship, you have to meet some very high standards. You will need to prove to the court that you are not able to make your student loan payments now, nor will you be able to make your student loan payments in the future.

Student loan story making history

WASHINGTON (Medill News Service) — Valisha Cooks, 28, graduated from the University of Phoenix in 2007 with almost $90,000 in debt, a sum so large she ended up filing for bankruptcy.

“I didn’t go to college to borrow a bunch of money and then shirk my responsibilities,” she said. “I earned a degree to better my life and set an example for my son, and I ended up bankrupt and still crushed by private-loan debt with no way out and no light at the end of the tunnel.”

Cooks is still left with a monthly payment of $627 for just the private loans, even after she filed for bankruptcy.

“I send them whatever I can afford each month,” she said. “They refuse to negotiate an affordable plan that would allow me to repay my loans.”

Do you think that the new law will ease student loan burdens? What’s your opinion?