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Trump Administration Proposes Limits on Student Loan Borrowing

Posted by Rory Vohwinkel | Mar 21, 2019 | 0 Comments

While it is early into 2019, it is already clear that the enormous amount of student loan debt carried in America will only continue to grow into the new year. All in all, over 44 million borrowers owe an incredible $1.5 trillion in student loan debt in the United States. The amount of student loan debt isn't just staggering; it is also growing. In recent years student loan debt has become the second largest category of debt for consumers, surpassing both mortgage and credit card debt.

Now the Trump Administration has released new higher education proposals intended to address the rising student loan debt crisis. The ten point plan addresses a number of education priorities, but the proposal relating to student loans is likely the most controversial. Among other proposals, the plan includes proposed limits on student loan borrowing. While the goal of this policy would be to curb rising student loan debt, but limits on debt would also restrict some options for borrowers. These limits could be especially frustrating if the policy is not coupled with other measures to lower the cost of higher education. The higher education proposals set out in the White House ten-point plan addressed issues other than limits on student loans.

These proposed rule changes are important to borrowers both old and new, especially for borrowers that are currently facing major debt issues. Complicating matters is the fact that the vast majority of student loan debt cannot be discharged through bankruptcy. Unlike other debt issues that may arise early in life, there is no potential for relief through bankruptcy with student loan debt. These long term consequences make a strong case for increased financial counseling requirements for students considering student loan debt.

Are there any circumstances that allow you to discharge a student loan in bankruptcy?

Under current bankruptcy laws, it is exceedingly rare to obtain a bankruptcy discharge for a student loan debt. However, in some rare cases, it is possible. To obtain a discharge, you must file what is known as an “adversary proceeding” in your bankruptcy case. During this proceeding, which is essentially another lawsuit within your bankruptcy case, you would be required to show the court that the repayment of your student loan debt would impose an undue hardship on you and any dependents you might have.

During this proceeding, your creditors will have an opportunity to be heard and object to the discharge. When determining if repayment would cause you undue hardship, the bankruptcy court will consider a number of factors including whether or not you can maintain a standard of living and if you made a good faith effort to repay those loans prior to bankruptcy. A discharge for student loan debt is rare, and it is best to discuss your expectations with a Nevada bankruptcy lawyer before filing your bankruptcy petition.

Discuss your Financial Situation with a Nevada Bankruptcy Attorney

If you are overwhelmed by debt, your first call should be to the experienced professionals with Vohwinkel Law to discuss your options. While a discharge of your student loan debt may not be in the cards, there are a variety of ways that the protections of a Chapter 7 or Chapter 13 bankruptcy filing can help you obtain a fresh start. Contact Vohwinkel Law today to schedule your free consultation.

About the Author

Rory Vohwinkel

Rory Vohwinkel began his legal career at one of Nevada's oldest and largest law firms, representing clients in commercial litigation and business transactions. Rory went on to serve as the sole in-house attorney for a national real estate investment and property management company. In 2009, Rory...

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