More young adults are turning to bankruptcy as an option to discharge large student loans

Tuition prices continue to increase each year, making it more expensive for young adults to get an education. To keep up with the rising costs, millions of college-bound students are forced to rely on student loans for financing.

However, many recent graduates may find it difficult to find a job that provides sufficient income to pay back college debt – assuming they can find a job at all in the current economy. As a result, some young Americans who owe thousands in debt are considering bankruptcy as an alternative, reports the San Francisco Chronicle.

What many young adults may not know is that it is very difficult to discharge student loans through bankruptcy. In order to do so, the borrower must prove that they are suffering from “undue hardship,” which is determined by three factors. First, they must show that repaying the loans under their current level of income would force them to live below the minimal standard of living, according to the Chronicle.

Second, the borrower must prove that their current financial or working situation is likely to continue through their repayment period. This provision primarily relates to a borrower who is precluded from working due to a physical or mental illness. And lastly, they must show that they made a good effort in repaying their debt.

Private loans are even more difficult to have discharged under bankruptcy unless they also fall under the undue hardship provision.

However, recent graduates or those having difficulties repaying their debt may also contact their student loan issuer and explore other repayment options. Federal loans have a number of plans that may lengthen the borrower’s repayment period, allowing them to make lower payments. Deferring loans or forbearance are other options that may be utilized in certain circumstances.

Similar Posts:

• Student loan defaults continue to rise
• Revised Rules for Student Credit Cards
• New Department of Education Policy Could Hit For-Profit Colleges
• Debt is accounting for half of many salaries
• Step By Step Guide on How to Rebuild the Credit Score