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Yes, student loans are crushing the country: a repayment proposal

Any well-considered proposal aimed at simplifying and streamlining the nation's student loan process is bound to get a lot of attention. A proposal recently rolled out by a number of organizations working in concert is no exception.

That suggestions regarding the student loan repayment process would readily invite close scrutiny is hardly surprising. As we noted in a recent blog post (please see our entry dated March 12, 2014), student loan indebtedness trails only mortgage debt nationally as the leading source of liability in homes across the country.

For readers seeking some concrete perspective on the degree to which student loans saddle both individual debtors and the country generally, we restate a couple eye-popping numbers from our earlier cited post: Reportedly, about 40 million Americans owe a ballpark amount of $1.2 trillion to creditors that financed their educations.

And, as has been well noted, many former students struggle mightily to pay back what they owe. Many simply cannot and file for bankruptcy. Although student loan obligations are not as readily dischargeable through bankruptcy as other types of unsecured debt (for example, credit card and medical debt), filing for bankruptcy can have a salutary effect for many debtors having such loans, given that other insuperable debt challenges can sometimes be reduced or eliminated.

The organizations alluded to above are proposing a simplified repayment option for loans that will reduce the current complexity of the numerous choices now available. A key feature of the proposal is its suggestion that repayment be uniformly based on a payer's income rather than on a stated duration of years, with any remaining balance upon term expiration being forgiven. Various recommendations are being put forward concerning the percentage of income that should be paid, as well as the income level that would serve as a baseline threshold for repayment.

Another key feature of the proposal is its stress upon automatic payments (think Social Security payroll deductions). The thinking underlying that recommendation is clear enough and instantly recalls the mantra, "Out of sight, out mind."

Student loans can be unduly challenging for many ex-students in Arkansas and elsewhere across the country. When coupled with other loan obligations, repayment exactions can seem insurmountable. Debtors pursuing repayment options and seeking debt-related solutions can receive candid and knowledgeable information from an experienced bankruptcy attorney.

Source: DailyFinance, "A proposal to radically simplify student loan payments," Karen Weise (Bloomberg Businessweek), March 24, 2014

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