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How To Deal With Student Debt?

Students have been borrowing more and more money in recent years to pay for college expenses. Due to the downturn in the economy, many students have been unsuccessful in finding employment upon graduation. Even those who find employment often have difficulty paying off their student loans. Filing for bankruptcy can help with problems involving credit card, home or other types of debt; however, student loans are not dischargeable in bankruptcy. This is true even if the student loans are from a private lender, such as a bank or Sally Mae.

Congress is considering new laws to ease the burden on students who took out loans for educational expenses and are unable to pay them back. There are two types of student loans: loans underwritten by the federal government (such as Stafford and Perkins loans) and loans underwritten by banks.

Current Bankruptcy Law:

Under the current bankruptcy law, debtors can discharge students loans if they experience “undue hardship”. This condition is almost impossible to prove in bankruptcy court unless the debtor has become totally disabled.

There is concern that if the bankruptcy laws are changed to allow students to discharge loans underwritten by banks for educational purposes, then the banks will stop lending money to students.

In the event that bankruptcy laws are modified to allow the discharge of student loans, the cost of such loans in the future will most likely increase. Congress should liberalize the laws concerning the discharging of student loans but the statue should be carefully written. Student loans should become dischargable only under limited circumstances.

Should you find yourself in financial difficulty, bankruptcy may be a solution to your problem. Call the bankruptcy attorneys at the law office of Elliot Schlissel at 1-800-344-6431 or by email to discuss your situation.

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