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Christopher Todd Morrison, P.C.
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Fed chair says it should be easier to discharge student loans

Many Texans struggle under the weight of their student debt. Unfortunately, however, these obligations are very difficult to discharge in bankruptcy. A large part of the reason is because Congress has passed several laws beginning in the 1970s forbidding the discharge of these types of loans in most cases.

Jerome Powell, the Federal Reserve chairman, reportedly said that he does not understand why student loans are treated differently than other types of debt in bankruptcy. In order to discharge student loans in bankruptcy, the courts must find that not doing so would present an undue hardship on the debtors.

Undue hardship has not been defined by Congress. However, courts across the nation have interpreted it to mean a high standard. Currently, almost 40 million Americans have student loan debt, and the aggregate amount is more than $1.4 trillion. Powell's comments were made in response to a question about the drag of student loan debt on the economy that was asked by a Democratic congressman from Hawaii. The Department of Education has asked about whether the phrase should be defined in a more generous way so that people might be able to more easily discharge their student loans.

If Congress acts to allow people to discharge their student loans in bankruptcy, it could provide substantial debt relief to millions of Americans. However, people who are currently unable to afford their student loan payments may still be able to discharge them. An experienced bankruptcy lawyer may assist people with understanding how the courts have interpreted an undue hardship so that they can weigh whether or not to request a student loan discharge in their bankruptcy cases.

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