Student loans are one type of debt that usually can’t be discharged in bankruptcy. This can leave people who are in dire financial straits with the full balance due on their student loans. Meanwhile, interest charges keep adding up. That means the person repaying the loan might not see much of a balance reduction despite making regular payments.
A bipartisan bill in the U.S. Senate seeks to make student loans dischargeable through bankruptcy after 10 years. The FRESH START Through Bankruptcy Act of 2021 is considered an alternative to student loan forgiveness. It requires some higher learning institutions to repay part of a student’s loan balance if the school meets certain requirements.
What are your current options?
While it’s sometimes possible to have student loans discharged through bankruptcy now, it’s very difficult to do this. You have to be able to prove that you have a financial hardship that’s making it impossible to repay your student loans.
For some people who file for bankruptcy, having to repay student loans won’t pose as big of a hardship if their other debts are discharged. However, there’s still the matter of how slowly student loan balances decrease even when a person is making all the payments on time.
Individuals who are drowning in debt should ensure that they explore their options to reclaim their financial health. Bankruptcy is one of these options.
If you’re in this position, be sure that you review the possible solutions and consider how each one will impact your future. It’s important to note that the FRESH START bill is a long way from being passed or signed into law, so borrowers shouldn’t count on this as an option to deal with student loans in the near future.