A student loan debt case revolving around bankruptcy has come to the Supreme Court and the question is asked: Does filing for bankruptcy forgive you of student loan debt? The debate over the cost of college and financial aid is endless and the world of financial aid is a tricky one to say the very least. This Supreme Court case revolves around an individual who declared bankruptcy and went before a judge who allowed a large amount of the student loan debt to be forgiven.
This worries lenders, as they fear a spike in bankruptcy will result from the precedent and they will begin to lose big when student loan debt is widely forgiven. A federal law states that a debtor can’t wipe out student loan debt through bankruptcy unless they have a “hardship hearing” and prove their case is truly one in which they can’t repay the debt.
It’s at this point where the case has made it to the Supreme Court seeing as how the gentleman in question didn’t have a formal hearing but rather informed his student loan lender he had filed bankruptcy and a judge backed him up when the lender protested.
Financial aid is a business at its core. Countless would-be college students are told their income, or rather, their parent’s income is much too high and all the prospective student can be offered is loans. The realty in many cases is students nor their families can afford to pay for college, so loans are the only option, and if upon graduating the student is struggling with finances and has to enter forbearance then the interest can double the original amount owed, and that’s only if they’re lucky.
Student loan debt is hard, if not impossible to be forgiven, but the amount of interest and total debt owed has no bounds. In this recession period many have had to ask for forbearance on their loans and they will just rack up more fees and interest as they struggle.
So should student loan debt be more easily forgiven or should financial aid lenders be able to continue to squeeze out every penny they can get from a struggling debtor?
Paying ones debts is a responsibility that shouldn’t be easily cast aside, but when a college degree does little to aid in the career or finances of the debtor don’t they deserve a little help or is it a case of they knew what they were getting into? When looking to save money some will hope to refinance in June 2012. Remember that refinance rates are near historic lows but you might want to check your current student loan rates before making any drastic decisions.