This is a continuation from Part 1 of this article.
NACBA has called on Congress to immediately eliminate the nondischargeability of private student loans. "There simply is no reason to allow private student loans to be treated differently from other types of unsecured credit. In fact, exempting these loans from discharge is likely to cause even more harm for borrowers since there are no interest rate limit or limits on fees charged for private student loans," the NACBA report states.
NACBA also recommends restoring the ability to discharge federal student loans after they have been owing for five years. Student loans owed for less than five years could be discharged based on a showing of undue hardship.
"Restoring bankruptcy protection for student loan debt is not the same thing as simply forgiving these loans. The 2005 changes to the Bankruptcy Code ensure that debtors who enter bankruptcy with funds to repay debts are not able to simply liquidate them through Chapter 7," the NACBA report states. "In addition, there are significant new barriers to access, including higher filing fees and mandatory counseling and education requirements. Any question about the existence or extent of past abuse of the bankruptcy system should be put to rest by the new system. The discharge should be restored for students who truly need the bankruptcy safety net."
Finally, the NACBA recommends restoring a reasonable statute of limitations for collecting student loans. "Just as student loans are among the few unsecured debts that generally are not dischargeable in bankruptcy, student loan borrowers have the unenviable distinction of holding debt with no statute of limitations. The Higher Education Act Amendments of 1991 eliminated the statute of limitations within which suits could be filed, judgments enforced or offset, garnishment or other actions initiated, to collect federal student loans. This lumps student borrowers with a very small number of law violations, such as murder and treason. Despite the governmental and societal interest in pursuing criminals, statues of limitation apply to nearly all federal criminal actions. The rare exceptions exist for those crimes that are punishable by death, including espionage and treason, and now, student loan defaults."
This the Part 2 of a 2 Part article.
