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Student Loans and the Supreme Court

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The biggest misconception students have when they fall behind on their student loan payments is that they can file for bankruptcy and get their student loan debt to be relieved. However, more and more people are finding out the hard way that this is not the case.

Student loans are nondischargeable debts and according to The Wall Street Journal, "Bankruptcy rarely cancels out student loan debt unless they can prove that a person has faced an 'undue hardship'."

Recently, the Supreme Court declined an appeal that would make erasing student loans easier in bankruptcy. When a borrower brought the appeal to the Supreme Court, the judge used a commonly used three-part test to determine the hardship of the borrower. The results were unfavorable to the borrow as the test proved the borrower to be capable of making payments.

According to the Federal Reserve Bank of New York, "majority of US students are 90 days behind on student loan payments." Many complain that the three-part test tends to be too strict leading the vast majority of borrowers to be denied relief on their student loans.

The test involves considering if a person is capable of earning a living while they make their student loan payments and if the hardships they are enduring will persist for a significant period of time.

There are other tests that few states located in the Midwest use that can lead to better results. However, the integrity of the federal student-loan program depends on ensuring that loans are repaid when feasible, which lessen the need for bankruptcy and makes an appeal nearly impossible.

 

We at Timothy J. Sierra Attorney at Law would like to state that our blog posts and links, on our web page or any other social media outlet, to any other web pages are not intended for legal advice. We are not responsible for third party website information. If one is in need of legal advice please contact an attorney directly.

Source: The Wall Street Journal | Student Loans

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