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Along with the political headlines capturing the attention from American audiences, student loan debt remains a mainstream issue for both students entering and leaving college. For student loan borrowers, things have changed rapidly including raising interest rates and eligibility in financial aid.

Sometimes, it seems like bankruptcy is the only option to escape the debt.  But will it help?

Florida ranks lowest amongst the states in average debt per borrower at $24,041 and 52 percent of graduates leaving with debt. But graduates in the Sunshine State still struggle to pay back loans between car payments, mortgages and possibly medical bills.

Can loans even be discharged through bankruptcy?

Both federal and private loans can qualify for discharge if they are solely to pay the higher education expenses of an eligible student.  The loans can actually be in the student, spouse or guardian’s name and still be eligible for bankruptcy. By discharging your loans, you’re no longer required to make payments on your loans due to unforeseen circumstances.

What do I need to prove to have my loan discharged?

You declare Chapter 7 or Chapter 13 bankruptcy and prove that repayment would impose a hardship on to you and your dependents. This is probably the most challenging aspect of bankruptcy, and creditors can challenge the request.

Courts often rely on multiple tests to determine hardship, and the primary factors they look at are:

  1. If you are forced to pay the loan, you will not maintain a minimal standard of living.
  2. There is evidence that this hardship will continue for a significant portion of the repayment period.
  3. You made significant efforts to repay the loan before filing.

If the courts accept the undue hardship, they are allowed to include different terms. Terms could range from discharging a portion of your debt to eliminating it entirely.

What can I do if I am not approved to discharge my loans?

It is difficult to be approved for discharge, so the likelihood of successfully obtaining an undue hardship is low. Success rates are higher for private student loans since private student loans don’t offer nearly as many consumer protections or options for repayment relief; an example is many private loan borrowers do not provide income-based or income-contingent plans.

There are other repayment plans, and switching to a plan that better fits your needs is possible. Contacting your loan service provider can help you find other repayment options or change your repayment plan.