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Guidelines concerning student loans and bankruptcy released

Confusion and controversy concerning student loans and their ability to be discharged during personal bankruptcy is hardly new. While student loans can be discharged in certain situations, more restrictions are leveraged against them than other types of debts. The Department of Education's recently released guidelines concerning the discharge of student loan debts might be a useful tool for Washington debtors who are considering filing for bankruptcy.

Before a student loan may be discharged, the Department of Education must first review the request and come to the conclusion that paying back the loan would result in an undue hardship on the debtor. There are several different factors that it considers, any combination of which might be enough to justify an undue hardship, although restrictions do exist within these factors. For instance, reaching the age of retirement can be proof of an undue hardship for individuals who took out student loans at a much younger age, while those who took out loans close to retirement -- either for themselves or a child -- typically cannot claim that reaching retirement age makes the repayment process unduly difficult.

Health is another factor that may be taken into account when deciding whether or not to discharge a student loan. In particular, declining health could be a justifiable reason for discharge. Should a debtor develop a serious, chronic illness that precludes him or her from working or earning as much as he or she once did, this might be considered an undue hardship if there are no other sources of possible income.

The cost of a higher education does not appear to be slowing down any time soon, and in a time when a college degree can be a necessity to get a job, not going is not always an option. For many students in Washington, student loans are the only avenue that can lead to a higher education. While discharging these loans in the past has not always been the easiest, the new guidelines could provide better guidance from bankruptcy filings.

Source: The Huffington Post, "Department of Education Reaches Decision About Student Loans and Bankruptcy", Steve Rhode, July 9, 2015

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