Private student loan bankruptcy protection denied | 02.08.08

Posted in Consolidation By Student Loan Network Staff

Private student loan bankruptcy protection denied

In the Higher Education Act Reauthorization (HR 4137) currently moving through Congress, an amendment by Representative Davis of Illinois would have extended some bankruptcy protection to students holding private student loans. Unfortunately for students, the amendment was voted down after strong opposition from banks and financial institutions.

The argument against the bankruptcy protection amendment was that its inclusion would ultimately make private student loans more expensive as lenders would need to increase rates and fees to cover loans that were in default and discharged in bankruptcy.

The Financial Aid Podcast has also done an analysis piece on this legislation.

The short version? For now, private student loan consolidation remains the best avenue for making private student loans more affordable.


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269 Responses to “Private student loan bankruptcy protection denied”

  1. Kevin says on October 21, 2011 at 1:13 am:

    First off let me state upfront: It was completely stupid of my to ever think private student loans were the answer to achieving a better life for myself. I am approximately $90,000 in student loan debt. $70,000 of which is to private student loan debt. This total is including accumulated interest. I borrowed to pay for school, partial living expenses. The interest rates have assured me to never paying back the loans. The good thing is I did achieve my undergraduate degree from state school. However, like most people today, I lost my job eight months ago and I have been out of work ever since. I have wracked up another $12,000 in credit card debt just to put food on the table and to survive. I have cut back everything imaginable and even moved back in with my parents. Fortunately, unemployment is making the bare minimum payments on all my bills of roughly $1600 per month. I have absolutely no money left over, not even to buy food.

    I have become seriously depressed. I spend hours upon hours every day looking for work. Any job I find I either never hear back, is a scam, or it does not pay more than unemployment. It is becoming apparent to me I can’t find a single job that will cover my student loan payments and living expenses. I sincerely believed I was going to get a good job after getting a degree. I worked my tail off at multiple part time jobs, studied hard, and went to college for 6 years to get my undergraduate in psychology. I’d love to work two jobs, or even three, but I can’t even find one. It has come to the point that I am trying to find anything under the table just to bring in enough money to keep making payments on my debt. I am prepared when my unemployment runs out, to work 3 jobs at fast food restaurants if I have to. But even then, it will not be enough to support myself.
    Simply put, I feel screwed and no way out of this mess other than defaulting. After all, what could they possibly take form me…I have nothing to take.

    Let me make it clear, I am not whining, or complaining. I am merely stating the facts:

    1. I was young and dumb to ever sign up for private student loans.
    2. I have more debt then I can pay back in today’s economy.
    3. You have to know someone in order to get a decent paying job.
    4. In the last eight months I have applied to exactly 481 jobs.
    5. I have been on 26 interviews.
    6. I declined 4 job offers because it did not pay enough to over basic living expenses, or the hours were so random that it did not allow for a second job option.

    Reply To This Comment
  2. Terri says on October 4, 2011 at 10:41 pm:

    My payments just went up on my private student loans. I’ve been paying $550 a month for my private and $585 for my Federal. I can’t afford the increase to $880 on my private loans. AES won’t work with me on a payment plan. If I keep making the $550 payment will they eventually garnish my check anyway? If they do I will loose my job (because I won’t be able to afford gasoline and tolls to get there) and not be able to pay anyone anything. So do I just stop paying my private loans all together to save up for when they force me out of my job. At lease then I will have something saved up to find housing for a while… What do most people end up doing? Anyone had experience with AES?

    Reply To This Comment
    • Student Loan Guru says on October 5, 2011 at 9:31 am:

      @Terri – You may still have a couple of options.

      1. Consolidate – Consolidation could potentially lower your monthly payments or interest rates, though it will lengthen the term of your loan.
      2. Defer your federal loans – Certain people may qualify for a financial hardship deferment, which could allow you to postpone payment on your federal loans for a while.
      3. Contact American Student Assistance (asa.org). This company specializes in helping students in default or at risk of default, so they may be able to offer some suggestions on your next steps.

      Reply To This Comment
      • Mimosa says on October 20, 2011 at 10:13 pm:

        You’ve got to be kidding me?it’s so trasnpreantly clear now!

    • Another Student says on October 20, 2011 at 7:05 am:

      Yeah, I have experience with AES. Yes, the interest is a killer.

      Reply To This Comment
  3. Student Loans Escape says on May 12, 2011 at 5:14 pm:

    Private Student Loans can finally be settled for much less than what you owe! Have you defaulted on your Student Loans and looking for a way out? Unfortunately bankruptcy is not an option yet, when it comes to Student Loans. Consider settlement!

    Reply To This Comment
  4. glenda says on December 31, 2010 at 9:29 am:

    punished for trying to do right!

    did anyone find any help? I am told I need to pay before the bank will even talk to me.

    Reply To This Comment
  5. UNCLE SAM says on October 23, 2010 at 10:39 pm:

    Well you have to pay to play, all you whiners signed on the doted line didn't you? One problem that I see with Sallie is false computation on interest and late payments are simply fabricated. However what's a few thousand when you owe many thousands who cares for the 650 late charge applied to the principal that is supposed to be in deferment and you aren't notified until the day after it is applied which creates a unjustified principal balance that is in or supposed to be in deferment to grow higher and higher at a who cares rate. Then there is AES who simply hides your rights to deferment and forbearance by not contacting you at all on old loans that they are cooking. Then when your threw with all the credits allowed for your brain power, you are left with the power of your ass. You can blame the service provider to the tricky computing but in the end the majority of the final numbers you signed for and agreed to, not withstanding the final number may be a few thousand higher due to shady bankers.

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