| The policy of the US government is so tailored that | | | | court of law. Another point in students favor is that |
| student loans for education are easily available. The | | | | the students' loans are not enforceable when the |
| result is that liberal loan schemes are on the anvil and | | | | school has closed prior to the student completing his |
| loans for higher studies are open for all. | | | | education. These challenges could be raised in a |
| However during the seventies a different | | | | Chapter 13 proceeding and decided by a bankruptcy |
| phenomenon had taken place. Students then in large | | | | judge. |
| numbers took education loans and accordingly | | | | According to these new changes a student loan can |
| obtained their degrees. But on completion of their | | | | only be discharged if the bankruptcy court is |
| courses, before they had got a job the students | | | | convinced that paying back the loan would bring |
| would file for bankruptcy. The purpose was to get | | | | about undue hardships for him or the people who are |
| out of the liability to pay back the loan. | | | | dependent on him. The Federal Student Aid |
| They could thus represent to the courts that they | | | | Ombudsman (FSAO) has thus come into the act and |
| had no income in their plea of bankruptcy as they | | | | has laid down three accepted standards to determine |
| were unemployed. However to obviate this lacuna | | | | whether a person is eligible to have his student loan |
| and also due to intense pressure the government | | | | discharged or not. They are worth a recap:a) Firstly |
| changed the law and the requirements in 1998. There | | | | the student will have to prove that in case he is |
| were further changes in 2005 and private loans were | | | | forced to pay his student loan than he will not be |
| also brought within the legal net. | | | | able to maintain a minimal standard of living for |
| The changes have effectively made it difficult to | | | | himself and his dependents.b) The second criterion is |
| discharge student loans with a simple plea of | | | | that in case he pays the loan for a significant period |
| bankruptcy. The only condition that can lead to a | | | | of time than the he will find it difficult maintain his |
| discharge of a student loan now is,if the student can | | | | finances.c) The last criterion is that a student has |
| prove that repaying the loan would create an undue | | | | made an effort to repay the loan before he decided |
| hardship on him and his family. Proving this is the | | | | to file for bankruptcy. The student's efforts to repay |
| responsibility of the student himself. Prior to this | | | | would usually be taken into consideration if the |
| student loans could be discharged in case they were | | | | payments have been effected for at least 5 years. |
| paid for 7 years but this has also changed since 1998. | | | | If you do not meet these criteria then filing for |
| Student loans are contracts like any other loan and | | | | bankruptcy will be a waste of time as the courts will |
| are subject to laws governing contracts.Thus fraud, | | | | throw out your case. |
| misrepresentation etc are open to challenge in a | | | | |