Should Student Loan Debt Be Easier to Discharge in Bankruptcy? - Top 3 Pros & Cons
|Friday, Jan. 5, 2018 | ProCon.org | MORE HEADLINES|
|Americans owe more than $1.4 trillion in student loans, student loan debt is much more difficult. Is a college education worth it?
with the average 2016 graduate owing $37,172. For the eight million student loan debtors currently in default—meaning they have not made a payment for at least 270 days—declaring bankruptcy and starting over may seem like an appealing option. Credit card debt, medical bills, auto loans, and even gambling debt can be canceled by declaring bankruptcy, but thanks to a 1976 law, discharging |
Educational debt was dischargeable before 1976, when Congress altered the bankruptcy code out of concern that people wouldn't pay back federal student loans. Later on, private student loans were also protected from discharge in the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. According to the US Department of Education, people who declare Chapter 7 or Chapter 13 bankruptcy can have student loan debt canceled, but only if a court finds there is evidence of "undue hardship." Getting student loans discharged is notoriously so rare that many lawyers advise clients not to try: less than 0.5% of student loan holders end up clearing their debts in bankruptcy.
Proponents of expanding student loan debt discharge argue that denying students the benefits of bankruptcy is unfair, and that student loan discharge would fix a system that disproportionately hurts minority students as well as encourage entrepreneurship and boost the US economy.
Opponents of making it easier to get rid of school debt during bankruptcy argue that expanding student loan debt discharge would allow borrowers to abuse the loan system, could destroy student loan programs, and would incite colleges to raise tuition.
Should Student Loan Debt Be Easier to Discharge in Bankruptcy?