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Private student loans

October 1, 2010

 

A bill that could benefit some Monmouth College students took its first quiet step through Congress on Sept. 15. The Private Student Loan Bankruptcy Fairness Act, H. R. 5043, passed the House Judiciary Committee’s Subcommittee on Commercial and Administrative Law by a vote of 6-3.

Chapter 11 of U.S. bankruptcy code currently requires individuals to demonstrate “undue hardship” before being able to discharge private student loans. H.R. 5043 would strike the language requiring demonstration of undue hardship which was added in 2005.

“[H.R. 5043] is a clear, common sense step in the right direction to stand up for students and borrowers. I look forward to voting for this legislation when it comes to the House floor. It’s a victory for students and families struggling to pay for college in this economy,” said Rep. George Miller, a co-sponsor of the bill, in a press release.

For the 113 Monmouth students currently receiving private loans, the bill may offer a way out of excessive debt. However, Jane Schreck, Monmouth’s director of financial aid, believes the bill may not be entirely beneficial,

“I feel that the removal of the statement for undue hardship will make it more convenient for the student to have these loans forgiven and that in turn affects them negatively for credit for a longer period of time,” said Schreck.

According to Schreck, the best way to avoid excessive debt is to not take out private student loans in the first place.

“Private loans, in general, I think should be a student’s last choice,” said Schreck. “A private educational loan does not have the safety net a federal loan is designed to provide.”

Before a student takes out a student loan, Schreck cautioned, they should make sure they have explored all their options and are receiving their maximum federal aid. Federal PLUS loans for parents, Schreck said, was another option students should pursue before resorting to a private loan.

Schreck acknowledged that there are times that federal financial aid is not enough and that parents are not always able or willing to help with college expenses. She said the recession has increased the number of students seeking private loans. “Some students are taking on private loans because their parents are not able to secure a parent PLUS loan. We are seeing more of that in the past few years because of the economy,” said Schreck.

For students who may have to pay back private student loans in a tough economy H.R. 5043 may offer help, but the bill still has to pass at least three more votes before it can become law.

 BY WESLEY TEAL
Copy/Layout Editor

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2 Responses to Private student loans

  1. Richard

    October 3, 2010 at 1:41 pm

    I am 28 year old in 100k+ student loan debt living with my father who also lost a job in this tough economy, in order to support both myself and my father, I have no other choice but to cease any payments to my student loan lender. The minimum monthly payment on my private student loans is $ 1570/month, that is almost 100% of my salary. I don’t know how am i ever going to repay my student loans, they just keep on increasing my balance by 20k per year due to interest alone. I dont even have enough money to for for that interest. I don’t understand how can a guy with a mansion and 5 cars, 2 yachts just walk away from his debt during bankruptcy but a guy with debt from college is stuck paying for life?

  2. Melissa

    October 6, 2010 at 4:10 pm

    I hear you, Richard. I have a Masters degree and a student loan debt that has ballooned up to 200k, much of that being interest payments. I am a teacher and have not been able to find a job, in fact so many education jobs have been cut in Chicago it’s almost impossible. I am homeless, living on a friend’s couch until I can find something else. I am sure I am going to default and then I’ll really be in trouble, but I don’t see a way out of this mess. I want to pay my loans, but when I have no job, no money, no anything, I certainly can’t pay over a thousand a month, and couldn’t even really do it on a starting salary anyway.