Many Americans are painfully aware of how much college tuition rates have skyrocketed in recent years. Tuition rates continue to increase to a degree far in excess of the inflation rate.
A professional degree such as a law degree, medical degree, or dental degree is often still an excellent investment. Other degrees, however, are sometimes not a good investment. The job markets are flooded with college graduates and some high paying jobs such as sales jobs may require no college degree.
Also, many small business people succeed very well without a college degree. My advice for those contemplating incurring student loan debt is to carefully evaluate the expected return on investment before signing for student loan debt.
Why? Since October 17, 2005 no student loan debt may be discharged in bankruptcy unless the client shows he or she would suffer “undue hardship” if not granted a discharge of the student loan debt. The bankruptcy client would need to file a separate proceeding within the bankruptcy case to have any chance at discharging the debt.
The courts have generally determined that the Undue Hardship Test is not met unless the person has developed a disability after the student loan debt was incurred which completely prevents the client from practicing the trade or profession the client took out the student loans to prepare for or the client is of advanced age, that is beyond the normal retirement age, and owes a substantial amount of student loan debt.
A Chapter 7 client of mine a few years ago was able to discharge over $100,000 in student loan debt taken out for a professional degree program she had entered after she had retired from her first career while in her mid-50s. This client was able to meet the undue hardship test although she wasn’t disabled and to obtain a discharge of her student loan debt, but she was over 65 years old, owed over $100,000 in student loan debt, and had been unable to obtain professional licensure related to the educational program she had taken out the student loan debt for.
I see many clients who took out student loan debt, which I would not have encouraged them to take acquire, who won't be able to discharge these debts in bankruptcy even though they can’t reasonably afford to repay them. Education is great, but there are often less expensive alternatives than the most highly ranked program a person is able to attend.
As a St. Louis bankruptcy attorney who has had clients saddled with enormous student loan debts, I would advise you to choose an economical option for obtaining necessary education, and be very careful about signing for student loan debt because it’s very unlikely you would be able to discharge any student loan debts in bankruptcy.
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