Poor Student No More

The U.S. Supreme Court agreed to hear a case regarding student debt.  The case will decide whether or not students can avoid paying back their federally backed student loans without proving “undue hardship.”  Basically, as of now when you file for bankruptcy, you could be able to discharge some or all of your student loans, as long as you proved “undue hardship.”  The problem is that “undue hardship” is not really defined.  There are some vague criteria depending on where you live (state and district), but nothing concrete and objective.  Most contain guidelines like, “Must prove that paying loans would inhibit maintaining a ‘basic’ standard of living and that this financial state is likely to last for an extended period of time.”

If the Court ruled in favor of the student, this means that you would not have to provide evidence that paying your loans would cause extreme financial hardship if you are declaring bankruptcy.  This would make it easier and more likely that you could discharge your student loans when filing for bankruptcy.

Let’s hope though, that the education you bought with those loans provides enough value to not file for bankruptcy.