The weak economy and an uncompromising job market has led individuals to seek refuge through higher education. However, a rising cost of education and the high interest rates of private student loans has suffocated recent graduates. University graduates are unable to afford rent, housing, and transportation due to the unprecedented level of student debt. Student loan debt in the United States is reaching crisis levels, amounting more than 1.2 trillion dollars and standing at the second highest consumer debt in the US, closely behind mortgages.The weak economy and the high unemployment numbers have forced borrowers to pay as much as 25% of their income on monthly student loan payments. The dollar amount of student loans has tripled since 2004, and delinquency rate amongst borrowers is now close to 20%. 

There are few consumer protections available for individuals taking out loans to pursue higher education. Borrowers struggle to repay the harrowing costs and are often forced into default. Before 1998, the United States student loan debt could be discharged through bankruptcy. However, Congress changed the laws to make bankruptcy near impossible for students, amidst concerning reports that doctors and lawyers were abusing the system by filing for bankruptcy to clean their debt. The new standard, persisting to this day, allows student loans to be considered for bankruptcy only if the borrower can prove “undue hardships.” 

“Undue” hardship has proven difficult to define in the courts. The courts first determine if the individual exhausted every option before filing for bankruptcy. Cases still continue to emerge where loan companies lead ruthless campaigns against unfortunate individuals presented with “undue” financial hardships. One woman had been fighting pancreatic cancer was unable to pay both her student and medical monthly debt payments. She took more than one job, sold her car, and even charged her young son rent to live in the house, but could not keep up with the payments and opted to declare bankruptcy. However, lawyers siding with the student loan companies defeated her bankruptcy claim by successfully arguing that she spent too much money on dining out, pointing to $12 she had spent on a value meal at McDonalds to share with her family. 

Planned bankruptcy with sound legal guidance provides viable solutions to those suffering from unfortunate financial circumstances. Bankruptcy has helped many Americans restructure and rebuild their lives. It helps individuals from going into default on their debt repayments, and it can be claimed for debts from a variety of sources, including gambling debt, credit card debt, and mortgage. Opening the option of bankruptcy to student loan debt would relieve much of the hardships facing college graduates. 

Introduced Legislation* that suggests easing the standard of bankruptcy for student loans has stalled in Congress. Finding a solution is within the interest of the United States. College graduates starting their lives should not suffer from a crippling debt. The federal government needs to prevent another debt crisis that will again hurt the country’s delicate recovering economy. Student loans should be dischargeable through bankruptcy. This will increase pressure on private companies to offer relief and repayment options to borrowers. If the federal government does not increase attention on the student debt crisis, the United States risks another possible economic collapse.

*As of November 13, 2015 this legislation was not acted upon.