As a proud member of NACBA (National Association of Consumer Bankruptcy Attorneys), I am glad to see that the current President of that association is making student loans and their resulting debt load on Americans a priority and it seems the White House is listening by recent signing of the Student Aid Bill of Rights on March 10th.  Student loans had been dischargeable in bankruptcy under prior Bankruptcy code, but that changed in 2005.  Current federal bankruptcy law lists student loans as a non-dischargeable debt, whether they are federal or private student loans, unless there is an “undue hardship” to the debtor.  The term “undue hardship” is not defined.  This has been a hard burden to meet, and debtors are often required to seek out other options with student loans before seeking discharge in bankruptcy; such as federal repayment and rehabilitation programs.  Rulings on student loan discharge vary by jurisdiction and vary widely given that the law requires a fact specific. 

According to figures by Northeastern University professor Daniel Austin, the amount of student loan debt that people have when they file for bankruptcy is growing.  However, less than 1000 people per year attempt to discharge their student loans in bankruptcy. See:  (https://blogs.wsj.com/bankruptcy/2015/03/10/bankruptcy-lawyers-cheer-white-house-focus-on-student-debt/)

No one knows what the outcome of the review under the Student Aid Bill of Rights, but it is a step in the direction towards potential relief for borrowers suffering from a large and ominous student loan debt.  Often times, a borrower is harmed by owing student loans, preventing them from purchasing homes, vehicles or even qualifying for loans on these items.  For now, we will just have to wait and see the outcome.  

NACBA website:  https://www.nacba.org/

Student Aid Bill of Rights White House Press Office Fact Sheet:  https://www.whitehouse.gov/the-press-office/2015/03/10/fact-sheet-student-aid-bill-rights-taking-action-ensure-strong-consumer-

 © Roxanne M. Alhejaj, Attorney at Law

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