New Bill Could Help Students Decide if Student Loan Debt is Right for Their Situation - John T. Orcutt - Legislation to Help Avoid College Debt

New Bill Could Help Students Decide if Student Loan Debt is Right for Their Situation

Submitted by Rachel R on Mon, 06/03/2013 - 10:12pm

New Bill Could Help Students Decide if Student Loan Debt is Right for Their Situation

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Student loans are the subject of debt discussion in many North Carolina households these days. With the cost of higher education skyrocketing, most students are forced to seek some sort of financial assistance in order to attend college. According to the Consumer Financial Protection Bureau, the total amount of student loan debt for college students in America passed the $1 trillion mark last year. Out of 37 million students in the country who borrow educational funds, each one owes an average of $24,301. Approximately 8.8 percent of all consumer debt is from student loans, which is up from just 3.1 percent in 2004. So, could a new proposed bill do anything to help those people who are drowning in student loan debt?

At a recent press conference, US Senators Ron Wyden (D-OR), Marco Rubio (R-FL), Mark Warner (D-VA), and US Representatives Duncan Hunter (R-CA) and Robert Andrews (D-NJ) introduced the Student Right to Know Before You Go Act. The proposed law looks to provide both students and their families with key information that will help to make more informed decisions about college. Specifically, it would help students to take a closer look at schools and their programs based on key data. For example, the Act would inform students about the graduation rates for “non-traditional students, transfer rates, frequency with which graduates go on to pursue higher levels of education, student debt, and post-graduation earnings and employment outcomes.” But, how will this information help students who are looking to borrow thousands of dollars for an education?

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As it stands now, there is no information provided to students about how much they stand to earn once they graduate from their major of choice. Many students willingly take out hefty student loans under the assumption that once they graduate and start working, it will be easy to pay off the debt. Unfortunately, this is proving to be a huge mistake for many students. Some are even finding that their field of study is experiencing serious problems with under- or unemployment as a result of the recession. Under the Act, colleges would have to provide average earnings based on each program of study, credentials received and state of employment.

Additionally, colleges only report the percentage of students who receive financial aid as a whole. This group includes both federal financial aid and private student loans. Lumping each student debtor into one big category does not give a clear indication as to how devastating a private student loan can be after graduation. The Act aims to break down student financial aid information by student type and program of study.

Another problem currently plaguing college students is that no information is calculated as to a student’s average federal loan debt. The proposed Act would make information available to students showing the average federal debt for those who graduate, breaking down the dollar amount for each institution, degree and major.

One of the major advantages to the Act is that it provides prospective students with financial education about the differences in private student loans and federal student loans. Most students do not understand that federal loans have a fixed interest rate and offer a list of consumer protections, including deferment and forbearance for those facing hardships. Federal loans also offer repayment options that are manageable, making college an experience that does not weigh on the pocketbook for another 40 years after graduation.

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On the other hand, private student loans lenders are private profit operations, often compared to credit cards and not financial student aid. They come with uncapped interest rates that have gone as high as 18 percent in the last several years. In addition, they have high origination fees and very, very few consumer protections. They are also generally ineligible for any kind of federal forgiveness, cancellation or repayment programs in times of financial hardship. Private student loans are only discharged in bankruptcy under extreme circumstances.

If passed, the Act would essentially help to educate students and their family members about all things financial as they relate to the expense of college. If a student understands that they will not earn a wage that could possibly fund a repayment plan for private student loans post- graduation, they would be able to change their major or look for alternate forms of aid before signing on the dotted line. It could be a wonderful tool to inform students of the pitfalls and dangers of student loans before they are in over their heads with debt and facing bankruptcy.

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If you are currently struggling with massive amounts of debt, including student loan debt, it may be time to consult with an experienced North Carolina bankruptcy attorney. With professional legal guidance, your bankruptcy lawyer can explain the current bankruptcy laws in North Carolina and then show you how a Chapter 7 or Chapter 13 bankruptcy filing could potentially help your situation.  

Dedicated to helping residents of North Carolina find the best solutions to their debt problems. Don’t waste another day worrying about your debt. Call +1-919-646-2654 today to schedule a free initial consultation to discuss your bankruptcy options.

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