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Should Bankruptcy Laws Allow Student Loans To Be Dischargeable?

 If the purpose of college is to go and earn an education or learn a trade that will give you a better chance at better opportunities in life, then why is there so much student debt?  With millions of students continually entering into thousands and thousands of dollars of student debt, it is no surprise that our national student debt total is over a trillion dollars.  Not only are more and more students entering college, but the cost of going into college is going up.  While bankruptcy is an unfortunate path to have to take, it should not cause student loans to be dischargeable any more than the law currently states.

In our current situation, if individuals filing for bankruptcy can prove that if they were to pay back their student loans, it would cause “undue hardship”, then there are possibilities for their loans to be fully dismissed, or partially dismissed.  In order for this to happen, they would have to prove 3 things using a Brunner Test.  The test asses if it would be impossible to pay back the debt and maintain a minimal standard of living based off of their current income and expenses if additional circumstances are present that will persist and interfere with the ability to pay off debts, and that they have made good faith efforts in paying back their student loans.  With this test, courts are able to determine if the person filing for bankruptcy would be able to have their student loans either fully or partially dismissed.  While qualifying for these terms makes it much more likely that their loans can be dismissed, it does not guarantee it.

When someone files for bankruptcy, the money that they have not been able to repay has to go somewhere.  The money that they owe ends up being absorbed by the business and banks that they owe it too.  While this may seem better than being rebounded by taxpayers, it still has major repercussions.  When businesses lose money they have decisions to make about how they are going to make back that money.  This could be done by letting go of employees, cutting hours, or just taking it out of their savings.   The individual filing for bankruptcy has a couple of things happen to them after going bankrupt.  Their credit score will change depending on their current credit.  If they have better credit scores, it will drop significantly more than those with poorer credit.  Those with poor credit will lose between 130 to 150 points, while those with higher credit will drop around 200 credits.  No matter what, bankruptcies hurt everyone involved.

Some would argue that those filing for bankruptcies should have their student loans dismissed just like any other debt that gets dismissed through bankruptcy.  They would make the argument that a loan is a loan, and the unfortunate person filing for bankruptcy should have it dismissed with their auto loans, home loans, and other debts.  While this would sure be nice, the logic of bankruptcy doesn’t apply in this case.  When someone files for chapter 7 bankruptcy their assets get sold and distributed back to who they are loaning money from.  In the case of student loans, there is no way to sell knowledge back to the loaner.  Because of the lack of logical continuity, that aspect of the opposition’s argument is not valid.  

If someone has student loans, then they have been through some form of elevated education.  This means that they have an advantage over those who have not been through advanced levels of education, which should allow them to pay back their debts better than others.  In conclusion, there is already ample law in place for the people who need it to get their student loans dismissed, if more people get their student loans dismissed through bankruptcy, it will negatively affect many more people.  Opening the dismissal of student loans to more than just those who would have undue hardship has a couple of logical fallacies.  Bankruptcy laws should not be changed to allow more people to have their student loans discharged.