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| Economy | |
| Bankruptcy 'opportunity' after student loan crisis | |
| 2023-12-04 | |
Elizabeth Hadzic, a divorced mum-of-three, has ideas about what she would do if she weren't facing a mountain of student debt: open her own therapy practice, return to her native Canada, work remotely and spend a month with her grandchild. A change to the US bankruptcy process could make it all possible. Last year, the US said it would make it easier for people to free themselves of student loans in bankruptcy, a prospect long considered hopeless. It is a move with potentially vast implications in a country where more than 43 million people carry student debt, generating a total debt load of more than $1.7tn (£1.34tn), and borrowers often face heavy monthly bills decades after they have finished their education. For decades, student loans in the US have faced a higher bar for forgiveness than other debts, like credit-cards, with borrowers forced to prove "undue hardship" if forced to repay - a term that has led to contentious court battles. The rules were created to prevent borrowers from taking on big loans with no intention of repaying - and limit the potentially huge cost to the federal government, which is the largest provider of student loans in the US. But critics say it has led to a system that is unduly harsh, generating horror stories of the government fighting bankrupt single mothers and cancer patients for thousands of dollars in monthly debts they are unable to pay. Unlike the UK and other parts of the world, monthly student loan payments often bear no relation to a borrower's income; nor do they come with an expiration date. President Joe Biden, whose most ambitious debt forgiveness plan was blocked by the courts this year, backed changes to the bankruptcy system during his 2020 presidential campaign. Guidance from the Department of Justice announced last year instructed officials to avoid litigation and agree to discharge the loans if a borrower faces higher expenses than income; is unlikely to be able to pay the loan in the future; and has made an effort to pay. An estimated 250,000 people with student loans file for bankruptcy in the US each year, and under the new guidelines, about 100,000 could be eligible for some student debt relief, according to estimates by Jason Iuliano, a law professor at the University of Utah. But so far, only a small number - about 630 - have actually petitioned to discharge their student loans as part of their personal bankruptcy. The Department of Justice would not say how many of those claims had been resolved, but said some relief had been granted in 99% of those that had. Advocates said that number stood at just a few dozen as of July. hose who have pursued relief via bankruptcy typically face months of wait. Aaron Ament, president of the National Student Legal Defense Network, warned those delays could worsen if the idea gains traction. Petitions in the first 10 months since the change were already about 30% more than the average pre-pandemic year. Those numbers are expected to accelerate, as borrowers have to resume student loan payments after a three-year pandemic-related pause ended in October. "It's getting real now in terms of coming up with the money to pay the loans out of their existing budget," said Latife Neu, a student loan and bankruptcy lawyer in Washington state, who said she had seen a steady uptick in inquiries. | |
| Posted by:Skidmark |
| #1 So, abandon the loan and deduct the loss on your income taxes for a number of years. Poss almost double the loan value. |
| Posted by: Skidmark 2023-12-04 07:37 |