Student loan interest rates across the United States may increase in 2013 from 3.4% to 6.8% thus doubling the government’s revenue and profits from loan repayments to almost $70 billion dollars.
Professor Alan White, says that “Congress’ dirty secret is that the government makes a huge annual profit on student loans.” In his latest blog he writes “$37 billion will flow in to [the U.S.] Treasury from student loans made this fiscal year at the 3.4% rate.” If the interest “rate will jump up to 6.8% for 2013 loans, [that would yield] another $30 to $40 billion return to Treasury.”
Government doesn’t lose from borrowers who can’t or don’t pay on their student loans. According to Professor White, student loan creditors have “supercreditor powers, especially wage garnishment and tax refund intercepts. . . [, t]here is no statute of limitations… , and even bankruptcy discharge is difficult. The $37 billion Treasury profit for [fiscal year] 2012 is after allowing for estimated credit losses in the $5 billion range.” This is because the Treasury can borrow money at 0.5% or less, and lends it to students at 3.4% or what may be 6.8%.
Bankruptcy may be solution for some people, especially where I practice law in Riverside County and Orange County. Student loan debts are generally not dischargeable in a Chapter 7 Bankruptcy . However, you can file a chapter 13 bankruptcy in Riverside or Orange County and the court will permit you to make reduced payments. This can stop the garnishments and levies by student loan creditors. Coupled with discharging credit card debt, medical bills and other liabilities you may find some light at the end of the tunnel.
Until Congress can stop bickering over their bipartisan solution to the student loan debt crisis contact bankruptcy may be your better option for now. Contact us today for a free consultation with a Riverside or Orange County Bankruptcy Attorney.
