Democratic Senators Strive to Help Broke College Students

Under current bankruptcy law, most student loans cannot be discharged in bankruptcy. In the 1970s this law applied only to federal student loans, serving as a protection for the federal government for when it invests in higher education. In 2005, the law changed to extend protection to for-profit student loan debts. Now, some senators hope to revert the law back to the original 1970s wording that only protects federal student loans from discharge.

The senators reason that today's troubled job market makes it impossible for some students to pay down student loan debts. Yet, under the current law, filing for bankruptcy is not a solution. So students are left shouldering a massive amount of debt they cannot repay because they cannot get a job, and bankruptcy provides no way out.

According to U.S. Rep. John Conyers, Jr., these private student loans are really no different than other unsecured debts like credit cards and personal loans. As such, they should be treated the same in bankruptcy proceedings. Also, because there is little regulation for these types of loans, some legislators in Congress feel that for-profit student loans are predatory in nature, preying upon struggling students who just want a better life, yet have little financial resources with which to pay for their education.

Legislation was introduced in June in the House and Senate and still awaits a vote. Meanwhile, this summer has yielded very poor job results for the most recent graduates. This is not surprising, however, as 2010 saw a 18.4 percent unemployment rate for 16 to 24 year-olds, a figure nearly twice that of the national unemployment rate.

If the new legislation passes, students who found themselves without a job and facing bill collectors from their student debts could file for bankruptcy, ridding themselves of these private debts while not limiting their ability to get an education.