A large number of students apply for student loans each year. This is due to the increasing costs of education, which makes it difficult for many to afford an education with their own money. Unlike grants and scholarships, student loans (both federal and private) need to be paid back. Although student loans usually have terms and conditions designed to accommodate students, in some situations students may find it hard to repay the money they owe.
In cases of bankruptcy, student loans (unlike most other loans) are not usually discharged. This issue has been debated heavily and many contend that student loans should be made dischargeable in cases of bankruptcy. In fact, the situation wasn't always like this. Before 1976, all student loans could be discharged in bankruptcy. Since then, the rules have gradually tightened by legislators and, since 2005, even private student loans aren't discharged in bankruptcy. Undue hardship can be used to discharge some student loans, but this condition is rather difficult to establish.
To avoid situations of default or student loan bankruptcy, students should be careful from the start and choose aid options that are suited to fit their individual circumstances. The best aid options for students are grants and scholarships, but if students are unable to obtain these or federal loans, they can also opt for private student loans. However, students must remember that private student loans have stricter repayment terms and higher interest rates compared to federal loans.
If you are considering applying for private student loans, you must conduct a thorough search so that you are able to find a loan that caters to your financial situation. To assist you in this process, we have created a Student Loan Comparison Tool that you can use to compare different private student loans. Begin your search as early as possible and use our tool for your convenience. Not only is this tool user-friendly and fast, it's also free!
Q:Can you tell me about declaring bankruptcy because of student loans?
A:Student loans can prove are difficult to discharge in bankruptcy, and may be impossible. Therefore, you should consult a lawyer.
Q:My search for bankruptcy and student loans mentioned undue hardship. What would be an example of this?
A:Undue hardship would be mentioned when searching for bankruptcy and student loans, as the definition for undue hardship is quite broad. Some courts have granted discharges if the students suffered at the hands of a fraudulent institution and did not benefit from the degree; the applicant's age and wage plays a major role in these cases. The courts also consider the applicant's family obligations and income.