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Friday, April 23, 2010

Congress May Allow Private Student Loans to Be Shed in Bankruptcy

Congress May Allow Private Student Loans to Be Shed in Bankruptcy

April 22, 2010 

Private student loans have long been one of the scariest debts that a person could take on. Unlike, say, a mortgage loan or a credit card balance, private student loans cannot be discharged in bankruptcy except in extreme circumstances.
Two bills recently introduced in Congress aim to change that. Senators Dick Durbin (D-IL), Sheldon Whitehouse (D-RI) and Al Franken (D-MN) introduced a bill in the Senate that would rework the bankruptcy code, while Representatives Steve Cohen (D-TN) and Danny Davis (D-IL) introduced a similar bill in the House. While there are some differences between the measures, each aims to have the courts treat private student loans like most other types of debt. However, both bills would continue to except private student loans offered by state agencies from bankruptcy proceedings, according to Mark Kantrowitz, who tracks the student loan industry for FinAid.com.
A hearing on the bill is scheduled for this morning in the House.

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