Illinois Legislature passes student loan resolution
On behalf of Ahmad Tayseer Sulaiman
Bankruptcy can be an indirect solution to student loan debt.
One of the financial problems faced by young people today is student loan
debt. Many find that this is unavoidable, as a person often needs to go
to college to get a higher paying job in today's world. However, upon
graduation, there are no jobs available, due to the slowly recovering economy.
student loan debt crisis has been a recurring topic in the media, for good reason. Outstanding
student loans in the United States have increased to over $1 trillion-more
than what Americans owe on their credit cards and car loans combined.
In Illinois, the problem has gotten so bad that the legislature recently
passed House Resolution 620. Under this resolution, the legislature formally
asked Congress to amend the bankruptcy rules to make it easier to forgive
student loans in bankruptcy.
Bankruptcy and student loan debt
Currently, student loan debt cannot be discharged in bankruptcy in most
cases. However, contrary to popular belief, this was not always the case.
Student loans were completely dischargeable in bankruptcy, until the mid-1970s.
Since that time, Congress has periodically enacted legislation that has
restricted the discharge of student loans. Eventually, in 1998, Congress
made federal student loans nondischargeable.
Under the law as it currently stands, private student loans remain dischargeable,
but only in very exceptional cases. The law requires those seeking a discharge
to prove that repaying the loans would constitute an undue hardship. Although
there are differences in interpretation of the law, most courts require
borrowers to prove:
- That he or she has tried to repay the loan in good faith;
- That due to the outstanding debt, it would be impossible to maintain a
minimum standard of living; and
- That this financial situation is likely to persist unabated for the loan's
Although most borrowers can prove the first two elements, most fail at
the last element, as it is difficult to prove that the borrower would
likely never find a job or other source of income that would eventually
allow the loan to be repaid. As a result, the discharge of private student
loans is largely reserved for those with serious injuries that render
them unable to work.
Consult an attorney
If you are struggling to pay your student loans, it may seem that bankruptcy
would not be able to help, but this is generally not the case. Bankruptcy
can help by relieving you of your obligation to pay many other types of
debt such as
credit cards or medical bills. Once relieved of your other debt, you can devote more
of your resources to repaying your student loans.
In addition to bankruptcy, there are several other ways to manage student
loans. An experienced bankruptcy attorney can inform you of your options
and recommend one that would best address your unique situation.