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It’s graduation season, and while getting an education is extremely important to ensuring that you have a successful and fruitful professional future, the thought of paying back the overwhelming costs of your post-secondary education can be overwhelming. Regardless of the costs, the benefits of a degree are great and many students are left with no option but to take out student loans to fund it.

Studies show that roughly 40% of adults under the age of 30 struggle with student loan debt, not including any credit card debt or other loans taken out for living expenses while receiving a full-time education.

The median amount of student debt is $17,000, but this amount ranges significantly. On a larger scale, borrowers in the United States owe a cumulative $1.4 trillion dollars of student loan debt in the United States. The amount owed by individual bachelor’s degree recipients varies depending on many factors including age, the school attended, the job they got out of school, and the nature of the degree attained.

That being said, it’s easy to see why the burden and fear of looming student debt can force someone into considering bankruptcy later in life. Student debt, however, has proven itself to be difficult one to discharge in bankruptcy court. While federal law gives you the right to declare bankruptcy and get relief from your creditors, not all creditors are equal.

Why is it so Difficult to Discharge Student Debt in Bankruptcy?

There is a widespread belief that there are some benefits to promoting access to higher education through providing loans. If more people can get loans, more people can get money, more people can go to college, and educated workers are aplenty.

Unfortunately for many borrowers, however, there are many issues that may make borrowing for the cost of education unappealing. For one, interests rates can be incredibly high- even in some federally provided loans. Secondly, the job market is not as ripe for new talent as it used to be. In a massively competitive job market, it can be easier to take a lower-paying job without the benefit of receiving an education (and its accompanying debts).

One of the pivotal factors that retains the capital investment supporting the student loan market is the fact that these debts are hard to discharge. These capital investments keep interest rates relatively low and, in turn, make loans more affordable to individuals seeking loans.

Because student debt is so difficult to discharge, much like mortgage debt, investors are more likely to get a return. Therefore, these investors are more likely to keep investing and encourage the flow of the education market.

So, How Can I Discharge Student Debt in Bankruptcy?

While you can discharge your student debt in bankruptcy, it is a difficult process. While bankruptcy is rarely easy on its own, an attempt to discharge your student debt can make it a bit more complicated. With a bankruptcy expert by your side, however, you may be able to get relief.

In order to discharge your student debt, you must prove that you simply cannot pay back your federal student loans. While different courts can make the determination of inability to pay back student debt in different ways, the Colorado court has made its method clear.

Colorado courts look to see if the debtor satisfies three requirements:

1. Has the debtor made a good faith effort to repay the debt?
2. Has the debtor established that their financial situation does not allow them to make any meaningful payment against the student loans?
3. Has the debtor shown that their financial situation is not expected to improve or get better in the foreseeable future?

If you are filing for bankruptcy and you can answer “yes” to all three of these questions, it may be possible to avoid repayment of your student debts. This is because your student debt is considered to be an undue hardship.

Unfortunately, it’s impossible to evaluate whether a debtor meets this test without knowing more about their specific situation. If you think that you may be eligible for discharge of your student debts but you aren’t sure where to start, contact us to learn more about what our experienced Colorado bankruptcy experts can do for you.

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