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How to Discharge Student Loans

How to Discharge Student Loans Due to Economic Hardship

Earning a college degree is an important expense to accrue for all young people. But afterward it can also be incredibly stressful. Because as CBS News reports, student loan debt has hit an all-time high at $1.2 trillion, and affects nearly 40 million people.

So for many, simply paying off their student loan after it has gone into default (or at all) may not be possible, and the idea of discharging your student loan may have never come to mind. But you have options.

According to the Student Loan Borrower Assistance (SLBA), discharging your student loans may be difficult, but is not impossible. "To do so, you must show that payment of the debt "will impose an undue hardship on you and your dependents.""

How? One way is through what the courts call The Brunner Test. Wherein the debtor (or the debtor's attorney) must prove that they are experiencing what the court has deemed as "undue hardship." This is done through three steps (click here for other tests courts use).

1. Poverty. Your current income and expenses imply that you cannot maintain a minimal standard of living for yourself and your dependents in the likelihood that you would have to repay your loan.

2. Persistence. Where you stand currently with finances will unlikely change during a substantial portion of your repayment period.

3. Good faith. You have made what the law calls a "good faith" effort to keep your loans from going into default.

If you can then prove undue hardship, your loans will be forgiven and discharged.

Assuming you qualified to have your loans discharged; it may also be a good time to get your finances back on track and file for bankruptcy. Filing for bankruptcy protects you from creditor harassment, and helps you begin with a fresh start in all facets of your financial life.

For more information on discharging your student loans and bankruptcy advice, contact us for more information.