Student loans: still difficult to discharge in bankruptcy

Anyone with student loan debt probably knows that the pause in payments for the federally-backed loans has been extended through August 31, 2022. This pause was implemented early in the pandemic, and it’s hard to predict whether this is the real date payments will be expected to resume, or not. Pundits feel that these extensions are because 1) there’s still a lot of political debate over the idea of forgiving student loans outright, and 2) it’s just going to be very difficult to start this massive debt-collection system up again.

Student loans are difficult to discharge in bankruptcy. There is a legal test that’s applied, and while one local bankruptcy judge believes that the test is being used incorrectly, it takes a tremendous amount of time and research to get to the point of a judge making a decision at all. Most people cannot afford the legal bill that would be required, and with no guarantee of success, it’s not wonder that less than a tenth of one percent of student loan borrowers even make the attempt.

If you have a student loan and can afford the payments, it may be a good idea to set that amount of money aside each month for as long as this “pause” is in effect. When it ends, you’ll be used to living without that extra amount, and you’ll also be able to pay off some or all of the loan very quickly. If it turns out your dream comes true and the loan is actually forgiven, then you’ll have a nice bonus of money in your life. No one has any idea if, or when, student loans will ever be forgiven.

For those who do not know where they will find the money to make student loan payments once the pause is ended, that’s a lot of uncertainty. If you have other debts hanging over your head, this may be the right time to get a free consultation about the possibility of bankruptcy relief. I conduct an in-depth interview, and for some of my clients, getting other debts discharged is enough to make student loans manageable. I’m always willing to take your call.