Loans.org Says No to Discharging Student Loans through Bankruptcy

LOS ANGELES, June 12, 2012 /PRNewswire/ -- As student loan debt soars to unprecedented levels, current students and graduates alike are begging the government for relief. Many are proposing bankruptcy law changes that would allow the discharge of student loans, but according to a recent article by Loans.org, such a change may do more harm than good.

"One small fact that's either ignored or unknown by many is that a discharge of debt...is not the same as forgiveness or erasure of debt," says Loans.org in the article.

Rather, a discharge simply prevents any action to collect a debt from a borrower. As a result, if a borrower has a co-signer, the debt burden is shifted entirely to that co-signer.

Since many parents opted to co-sign student loans for their children, a change in bankruptcy law may bring about new hardship for the countless parents who would be held responsible for any discharged debt.

In fact, the only way co-signed parents could potentially enjoy the same bankruptcy perks as their children would be to declare bankruptcy themselves.

Source: http://govinfo.library.unt.edu/nbrc/report/07consum.html

This point warrants careful consideration since retirement—at least comfortable retirement—is becoming less and less accessible. Older individuals who were laid off from their original jobs during the recession are currently trying to find work wherever they can, sometimes settling for jobs that don't provide any retirement benefits whatsoever.

The retirement problem is so bad that AIG's CEO recently said he expects the retirement age to spike to as high as 80 years old in some areas of the developed world when the economic crisis is finished.

If student loans are allowed to be discharged, it's no slippery slope to imagine the retirement age growing higher than it is today, possibly reaching levels where the parents who co-signed student loans may not live long enough to see.

For more information on student borrowing issues, go to http://loans.org/student to find a frequently updated library of financing information. Additionally, prospective loan applicants can access a free-to-use quote-comparison generator that is designed to help consumers receive the lowest interest rates possible.

To access the full article on bankruptcy and student loans, readers can follow the "Articles" link at the top of any page on the site.

SOURCE Loans.org, LLC