Student Loan debt on the rise again in Speakers Corner October 26, 2011 What we need to do is remove bankruptcy protections on private student loans. The private student loan interest is insane. And, these loans enjoy the same bankruptcy protections that federal loans do, without any of the benefits, which allows private lenders to give student loans to anyone, regardless of their ability to pay, and make them into what amounts to extortionists a few years down the road. Example: Student: "Hi, feds! I lost my job. Can I have a forebearance on my loans? I'm on unemployment and can't make payments right now. I'm barely making my mortgage." Feds: "Sure! Or you can take classes part time and qualify for a deferment, and we'll start covering the interest on your subsidized loans again!" Student: "Great! Thank you" (sigh of relief) Student: "Hi, private loan lender! I lost my job. Can I have a forebearance on my loans? I'm on unemployment and can't make payments right now. I'm barely making my mortgage." Private Lender: "No! You have to pay us! You get a maximum of three months of forebearance, which you used five years ago when you had a baby! If you don't pay, we'll get your cosigner involved, send it to collections, sue you, ruin your credit, and garnish your wages." Student: "But I don't have any wages!" Private Lender: "That's not our problem." What's happening is that Congress has given PRIVATE, unsecured debt the same status as FEDERAL secured student loans. This is a major problem because the banks have absolutely no incentive to evaluate the creditworthiness of the borrower or their future earning potential, knowing that even if the borrower declares bankruptcy, under most circumstances, they can't get rid of this and it'll follow them forever! This is encouraging rising costs of education and leaving students buried in debt upon graduation, particularly those who started school prior to the economic crash and were told by their schools "Don't worry about the payments, you can consolidate!" and upon their graduation, virtually no banks are doing consolidation loans and for the few that are, qualifying for them is almost impossible, particularly as a new graduate, who are the ones who need them the most.