Your Student Loan Burden: Good News About Interest Rates?

Posted in: Student Loans

Are you overwhelmed by student loan payments?  As I’ve blogged about previously, the general rule is that a person who has filed for bankruptcy will not receive a discharge of student loans.  The only way to do so is to seek a determination from the court that repayment will impose an “undue hardship.”  Proving the required factors is very difficult.

However, there may be some temporary relief on the horizon.  The rate on subsidized Stafford loans is currently set to increase to 6.8% in July.  Yesterday Senate Democrats proposed legislation that would postpone an interest rate increase on student loans for two more years.  The current 3.4% interest rate would extend into 2015.

A similar extension granted in July 2012 during the Presidential campaign cost an estimated 6 billion dollars.  This year, the President has proposed allowing the interest rates to change and respond with market conditions.  Interest rates would depend on how much it costs the government to borrow money.   This issue has created a rare alignment of red and blue.  Three Republican  Senators, including Lamar Alexander, have introduced a bill to allow the return to market-based rates.

Whatever the outcome, the debate continues about whether changes should be made with regard to student loans’ dischargeability in bankruptcy.  Take advantage of our firm’s free consultations if you have questions about your student loan debt.