By JLP | November 29, 2010
My last coupld of posts drew quite a few comments. A couple of commenters made mention that student loans can’t be discharged in a bankruptcy. I was curious about this so I did a little research. I found this mention of student loans and bankruptcy on the Sallie Mae website:
If you’re having serious trouble paying back your debt, bankruptcy is not an easy out. In fact, bankruptcy should be considered an absolute last resort. And, after all your effort, student loans are not normally included in a bankruptcy filing.
Unless you can show that your education loan payment is an “undue hardship” on you, your family, and your dependents, your student loans are ineligible for cancellation (discharge) in bankruptcy.
It is difficult to prove “undue hardship” unless you are physically unable to work and there is no chance of your making money. To discharge your student loans under this special case, you must file a separate motion with the bankruptcy court and present your situation before a judge.
I have big issues with making it easier to forgive/discharge student loan debt (much like I have issues with discharging credit card debt). The only way I could see making student loan debt dischargeable is to also take away the person’s degree and any career positions dependent on that degree. In other words, NO…I don’t think people should get out of paying back their student loans. Harsh? Not in my opinion.
The best solution is to educate kids BEFORE they get themselves into trouble. Some sort of personal finance/college planning/life skills course should be required for all high school students before they graduate.