Millions of people have gotten a break from paying their federal student loans during the pandemic. But there has been no relief for millions of other people with private student loans who may not realize bankruptcy might be an option.
“For people who have lost their jobs during the pandemic and are struggling for money and still struggling to stay afloat, bankruptcy might be the best option for them,” said Mike Pierce, executive director of the Student Borrower Protection Center. “Especially if they are already on the verge of bankruptcy due to medical debt or credit card debt, being able to escape these often very high interest private student loans is a lifeline. safety.”
The Student Borrower Protection Center estimates that $50 billion in private student loans taken out by more than 2.6 million borrowers are eligible for bankruptcy discharge.
“Our investigation found evidence that for years, businesses large and small across the country told borrowers they were ineligible to cancel their loans and file for bankruptcy, while telling their investors that the law actually says you can pay them off in bankruptcy,” says Pierce.
Navient, a loan servicer and a group of 39 state attorneys general, recently reached a nearly $2 billion settlement. The repairer denies any wrongdoing.
Attorney Christie D. Arkovich has been helping people file for bankruptcy with their student loans since 2016, but says only a small number of people know bankruptcy is an option.
“Normally when a client comes to us, they’re either in default on a student loan or they’re making payments and it’s just not progressing,” Arkovich said. “So people who wouldn’t be for those who can easily pay their loans. Most of our customers can’t pay their loans. They’re basically just another mortgage payment.”
Arkovich’s clients range from 30s to 60s. Most have had student loans with high interest rates since the mid-2000s.
“We had a client who owed about $130,000, and so when she first came to see me, she was paying $1,300 a month, and that was just interest,” Arkovich said. “So she realized it was an eternal debt. She’s not making a dent in it, it’s never going to go away. So we reopened an older bankruptcy and ended up settling that for 24,000 $, so it was less than, what, 20, 22 cents on the dollar for very, very low payments.”
Arkovich says one of the biggest concerns of the people she works with is how a co-borrower on the student loan will be affected. The rules can arrange for the duty officer not to prosecute this person.