The average loan debt is thirty thousand dollars per student and more than 25% of people are behind on their payments or have defaulted. However, the Obama administration frowns upon borrowers discharging their government student loan debt by filing bankruptcy. The administration wants to protect the integrity of the federal student loan program.
The Brunner Test attempts to stop students from escaping their student loan debt by filing bankruptcy post-graduation. Very few individuals have been able to get around this standard, which is to prove undue hardship such as a chronic disability and also to make attempts to repay the student loans back.
Student loan debt is incredibly difficult to discharge in an effort to protect the system from abuse. If there was an option to file bankruptcy and obtain a discharge right after graduation, it would be a shame not to. However, in reality, more than a fourth of borrowers cannot pay their loans back. In some instances, a few individuals have succeeded in filing bankruptcy and discharging their student loans, but it is not easy and accompanies a costly and time consuming battle.
For now and until either Congress and/or the President decide to take action, bankruptcy relief for student loan debt will remain slim to none.
Source: Forbes, “Why Student Loans Are So Difficult To Discharge In Bankruptcy,” Stephen Dash, October 25, 2015.