Many beleaguered borrowers in Michigan were excited to hear of a recent initiative on the part of the Consumer Financial Protection Bureau (CFPB). The agency is asking borrowers and lenders, as well as the general public, for feedback concerning how to address hardship associated with high levels of private student loan debt. Upon compiling the results, the CFPB is expected to present a series of debt relief recommendations to Congress and other federal agencies.
A law passed in 2005 made it far more difficult for borrowers to discharge private student loan debt through bankruptcy. One possible path to debt relief involves asking Congress to reexamine that law, and determine if changes may be appropriate given the current economic climate. Another approach involves providing new options for borrowers to ease their debt before bankruptcy.
One such option involves giving borrowers the chance to refinance their existing student loan debt to make repayment a more viable option. Another form of relief could lie in allowing borrowers to lower their monthly payment. As the CFPB points out, student loan debt is not tied to an asset that can be repossessed in the way that a vehicle or home can. Reaching a solution requires reconsidering the existing rules and searching for alternative approaches.
For some who are just completing their degrees and entering the workforce, changes in existing law and practices could help ease any future repayment struggles. In some cases, however, the need for debt relief is urgent, and requires immediate attention. Bankruptcy can still be a viable solution in many cases. Even though it will not eliminate student loan debt, filing for personal bankruptcy can lead to the discharge of other forms of consumer debt, allowing Michigan filers to budget for student loan repayment.
Source: InsideHigherEd.com, "Thinking About Debt Relief," Libby A. Nelson, Feb. 22, 2013