Mostly false. I prepped and processed bankruptcies for two years and I only came across one instance where a student load was dischargable under chapter 7. IIRC, under a Chapter 13, they can be consolidated as an unsecured debt. I only did a few Chapter 13s so I'd have to go back and reread that part.
Yes, you can, it's just more difficult than other unsecured debt. This is a distressing popular myth which leads people to fail to explore their options.
> The reason student loans aren’t dischargeable in bankruptcy is because it’s basically literally impossible to collect on them, you can’t repo a college education
You can revoke the degree. Given that most people out of school don’t remember most of school anyways this should be enough for most.
> You can't discharge a student loan in bankruptcy. This makes sense. If you borrow money to purchase a car or a home the lender always has the option of repossessing the goods as a last resort.
Non-secured debt of other kinds are generally dischargeable in bankruptcy, so that principal isn't generally applied outside of student loans.
> The inability to be voided through bankruptcy, as I understand it, was setup so that educational loans would not wind up with insane interest rates. Given that they are unsecured (there's nothing for the lender to repossess if the borrower fails to pay), there is much greater risk to the lender.
Most loans issued before 2010 are guaranteed by the US government. So while they are technically unsecured, the government will cover the lender if the borrower doesn't pay.
Since 2010, student loans are actually owned by the government, that is, students are borrowing money directly from the US federal government.
So, in most cases, if a student loan were discharged in bankruptcy, it would be the federal government that would eat the cost of the loan.
> Why is student loan debt not dischargable in bankruptcy?
Student loan debt is dischargeable in bankruptcy, though it has a higher bar than most other debt.
> If it were, banks would be far less likely to issue them
Banks issue less than 10%, by dollar value, of student loans; the vast majority are federal direct loans. Even if banks dropped out of issuing them completely, it wouldn't make the kind of difference you suggest.
> Any loan that is charging 6.28% interest and also cant be discharged by bankruptcy
The interest rates are high because so few loans can be discharged by bankruptcy. You can refinance your mortgage with anyone. Far few companies will refinance your student loans.
Meanwhile, it makes prefect sense that bankruptcy cannot discharge student loans. Otherwise, every single student would have crappy credit from 21-28 and no student loans ever.
>>student loan debt, which cannot be discharged via bankruptcy
>Apparently this isn't true anymore:
That's not a fair summary of the linked article. Student loan debt still cannot be discharged using the ordinary rules of bankruptcy. You still need to prove undue hardship, and that still involves a tough, three part test. What happened was that one court allowed a single mother on food stamps to discharge some student loan debt -- a fact pattern that struck observers as unusual because those circumstances are relatively mild as compared to most successful cases.
> unlike with the mortgage bubble, student loan debt is non-dischargable-- even bankruptcy won't wipe it clean.
Student loan debt is not non-dischargeable, though it's harder to discharge in bankruptcy than general unsecured debt (and much harder to get out of than mortgage debt, which can often be escaped without bankruptcy.)
Student loans can be discharged in bankruptcy, but it is harder than other unsecured debt.
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