Declaring bankruptcy as a result of student debt

Receiving a higher education has long been idolized as a direct path to success. However, student loan debt is a topic that now overwhelms millions of Americans, and can even overshadow dreams of intellectual and financial prosperity. As the issue only moves further into the public eye, financial experts are debating the best ways to manage debt. Tennessee is home to thousands of graduates who struggle to make ends meet as a result of crippling student loan payment obligations.

It may come as no surprise that student loan debt is currently one of the most prominent issues in the country. As USA Today points out, student loan debt has surpassed credit card debt, having recently exceeded $1 trillion. Some may assume this problem will be short-lived, but the article in Today points to the contrary: the statistics keep climbing with little light at the end of the tunnel. As of April 2017, Americans faced $1.4 trillion in unpaid student debt. And while a great number of parents attempt to intervene by encouraging scholarship pursuits and pinching pennies, Today highlights the problem that wage growth is now dominated by rising costs. 60 percent of 2015 graduates from Tennessee faced student debt, with an average debt of $26,083. 

The U.S. Department of Education’s Federal Student Aid office clarifies the details of declaring bankruptcy when facing large amounts of student debt. Only once graduates file separate action can they proceed with having federal student loans discharged. The department makes clear to debtors that they must file Chapter 7 or Chapter 13 bankruptcy, as well as prove that repayment would create lasting issues with themselves and their dependents, to move forward with the discharge process. Creditors may also be present to challenge a debtor’s request to have loans discharged.  

 

 

  

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