Student Loan Debt Challenges

It is estimated that the national student loan debt load has reached $1 trillion. As one of the more difficult types of loans to manage a default, student loan debts have become a burden for many young Americans. With the struggles facing the job market more college graduates simply cannot afford to repay their debts, putting them in a position to face many challenges.

The Hurdles

One of the biggest challenges student loan debts face is how they are handled when they enter default. Not generally eligible for discharge in bankruptcy, student loan debtors have limited options for resolving their debts. Unable to find adequate employment and not offered much solace from lenders, many student loan borrowers avoid repayment altogether or end up in financial ruin over other debts as they scramble to repay their loans.

In the past, student loans may be considered for bankruptcy eligibility if the debts were older than 5 years. Since the 2005 changes to the bankruptcy code, these debts have become nearly impossible to resolve in Chapter 7 and may only be considered for Chapter 13 if the debts are upwards of ten to fifteen years old. For now there is no set guideline for considering student loan debts in bankruptcy and they will most often be denied until the debtor can prove they (a) have attempted to resolve or find relief from their debts directly with the lender, (b) made good faith efforts towards repaying the debts, (c) are experiencing undue financial hardships as a result of the student loan debt.