Return Bankruptcy Protection to Student Loans

Target: Members of Congress

Goal: Allow student loan borrowers to seek relief in bankruptcy court.

Student loan borrowers face significant challenges when trying to pay back thousands of dollars amidst high unemployment and interest rates. Congress has toughened laws preventing debtors from seeking relief in bankruptcy court, thereby providing no forgiveness for defaulting on loans. Please sign this petition and urge Congress to allow student loans to be dischargeable in bankruptcy court for those who have made a good-faith attempt to repay the loan and still experience financial difficulty.

According to the Federal Reserve Bank of New York, the average debt in 2011 was $23,300 with 10 percent owing more than $54,000 and 3 percent more than $100,000. As tuition increases annually and more and more parents are unable to afford higher education, students seeking success are forced to borrow more in order to complete their education. With the hopes of finding a “good” job after graduation, many borrow from multiple institutions to pay for one degree. Unfortunately, our nation has not recovered from the financial crisis and our unemployment rate remains steadily high. Bankruptcy discharge may be an essential protection from injury that might otherwise result without income or other means to manage debt.

With overall college debt surpassing $1 trillion, it is no wonder that there has been a sharp increase in the number of Americans seeking relief. Despite what many conservatives argue, defaults are not coming from irresponsible 20-somethings riding unemployment payments. The Federal Reserve Bank of New York reports borrowers in their 40s are the most likely to default, yet the average loan debt burden for borrowers under age 30 has risen 56 percent since 2005. As rates continue to rise and penalties pack on, borrowers will get lost in their debt without the option of bankruptcy forgiveness.

Please sign this petition and urge Congress to allow borrowers the option of pleading their case in bankruptcy court after they have made a good-faith attempt to settle the loan, yet continue to face financial difficulty.

PETITION LETTER:

Dear Members of Congress,

With overall college loan debt now surpassing $1 trillion, it is absolutely necessary to avoiding a debt crisis that federal bankruptcy law allow struggling Americans to turn to bankruptcy court for relief. Amidst high unemployment rates and a competitive work force, it is challenging to find employment that will cover the cost of living as well as interest rates, fees, and monthly loan payments. Please provide bankruptcy forgiveness to those who have made a good-faith effort to repay their student loans over a five- to seven-year period and still experience financial difficulty.

As the cost of tuition increases and more parents are unable to foot the bill due to barriers of their own (unemployment, cuts in pension and retirement, etc.), students are taking on the debt in hopes of landing a “good” job after graduation. As many have found, those “good” jobs are hard to come by, and loan repayment plans are less forgiving then lenders portrayed. The Department of Education reported that among the more than 3.6 million borrowers who entered repayment from Oct.1, 2008, to Sept.30, 2009, more than 320,000 had fallen behind in their payments by 360 days or more by the end of September 2010. It’s not just recent graduates that are feeling the burden. According to the Federal Reserve Bank of New York, borrowers in their 40s are most likely to default.

As the emerging debt bubble rears its ugly face, you must take action to find relief for these borrowers and avoid another financial crisis. Please reinstate bankruptcy forgiveness options for those who have proven they are unable to keep up with payments, despite good-faith attempts.

Sincerely,

[Your Name Here]

Photo Credit: longislandbankruptcyblog via Yahoo

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One Comment

  1. They reward and fund the big banks for corruption, but aren’t aware of the importance of providing an education to the citizens of our country. Instead of failing banks, we have a failing country.

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