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Why is student loan debt so difficult to discharge?

Filing for bankruptcy can offer individuals a clean slate in most areas of life, but a couple of forms of debt are notoriously difficult to discharge: mortgages and student loans. The latter might seem especially baffling, especially to younger people. Why can't student loans be discharged as easily as credit card debt or car loans?

In fact, until forty years ago, they could be. In the early 1970s, it was apparently so easy to discharge student loan debt that some lawmakers became worried that recent graduates were abusing the privilege and declaring bankruptcy before beginning well-paying jobs. So Congress passed the Education Amendments Act of 1976, which made student loans non-dischargeable for five years unless "undue hardship" could be proven

Establishing 'undue hardship': The Brunner test

The litmus test for discharging student debt was established in 1987 in Brunner v. New York Higher Education Services Corp., where Marie Brenner attempted to discharge her student loan debt after being unable to find a job nine months after graduation from a master's program.

The district court, in finding that Brenner's situation wasn't dire enough for her student debt to be discharged, adopted a standard for "undue hardship" that is still widely used today.

Under the Brenner test, debtors must show the following:

1. They would be unable to maintain a "minimal" standard of living for themselves and their dependents if they had to repay their student loans.

2. The above is unlikely to change over the loan repayment period.

3. They've made a good faith effort to repay their loans.

Expanding restrictions of debt discharge

Since the 1980s, it's gotten even harder to discharge student loan debt. The period for which student loans couldn't be discharged grew from five years to seven years in 1990 - and then a 1998 amendment made student loans non-dischargeable regardless of their age. Since 2005, restrictions were broadened to also apply to private student loans.

But even though it's difficult to discharge student loan debt, it's still not impossible. If you think you might be able to demonstrate significant hardship, be sure to talk to your attorney about the possibility of discharging your student loan debt.

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