Deciding whether to take out student loans to attend a California college can feel like an impossible decision. Borrow money to earn a degree and a land a better, well-paying job but struggle to ever repay a loan? Or skip college and earn less over time, leaving a person perhaps no better off than where he or she started? Unfortunately there is no easy answer, and those who do borrow money for school often struggle to repay their debts. The inability to discharge most student loans through Chapter 7 bankruptcy complicates things, but there could be help on the horizon.
Currently, 44 million people owe approximately $1.5 trillion in student loans. Those who graduated in 2016 left school owing an average of $37,172. This amount of debt is second only to U.S. mortgages, and totals more than the nation's collective credit card debt. If it weighs so heavily on debtors, why can it not be discharged?
Student loans were dischargeable before 1976. That year, Congress passed a law that stated debtors must have been repaying their loans for at least five years before they could be discharged. This requirement was later extended to seven years. By 1998 discharging student loans was made impossible unless a debtor could prove that repayment was an undue hardship. A 2005 ruling extended this law to private student loans.
However, bankruptcy judges across the nation witness the despair of people struggling with student loans. Although they cannot discharge the debts without evidence of undue hardship, many use work arounds to help debtors. In some situations, loans from unaccredited schools may be cancelled. In others, judges allow for full student loan payments during Chapter 13 repayment periods, which can help with the overall debt total.
Students do not take on debt thinking that they will easily mitigate the final total. Instead, most California students hope that they will reach a better future for themselves and their families. Unfortunately, debt can weigh down these goals, and many turn to Chapter 7 bankruptcy to handle debt that can be effectively discharged, such as credit cards.