Student loan debt is a known problem that sets many young people back as they enter the workforce. With debts of $30,000 and more, the monthly payment on these loans can make or break a budget, which limits spending power, increases the dependence on credit cards, and has other wide reaching effects on personal budgets and the greater economy. The payments last for years, which makes it feel as though no end is in sight.
Student loans were a frequent talking point in the last election and education costs continue to rise. Sometimes student loan payments make or break a budget. While we’ve previously discussed the challenge of bankruptcy and student loans, the federal government is gathering information. In late February, the federal register requested public comments about claims of undue hardship.
Defining undue hardship
Bankruptcy court uses the concept of undue hardship to determine if a student loan is forgivable under current law. Undue hardship is a vague status point that reviews how loan payments affect a debtor’s overall financial position. Under current law, it’s rarely granted, which is why the government is seeking real world input.
While the news is welcome to those struggling with student debt, it’s only gathering information at this point. Advocates view it as a sign that the law could change in the future, so it’s something to watch.
Finding workable solutions
Unfortunately, anyone struggling to get by needs help now. Although it’s difficult, it’s not impossible under current law to have student loans included in a bankruptcy hearing. Different chapter bankruptcy filings provide different options, and each case has unique circumstances. Besides bankruptcy, there may be other debt relief solutions to alleviate some of the stress in managing daily expenses and staying afloat so even though student loans have a complex history with bankruptcy hearings, there may be other legal options for help.