A brief And you will Unfortunate Reputation for Student loan DISCHARGEABILITY
Prior to 1976 – Student education loans is released like many un-secured debts and you may borrowing from the bank and you may payment was subject to regular markets pushes like most other personal debt.
It has got skewed the fresh new student loan market greatly and only loan providers, resulting in disastrously negative effects to possess education loan borrowers:
1976 – Federal Legislation kept that student loans cannot getting discharged unless they had experienced fees for five ages ahead of the submitting of your own personal bankruptcy; should your college loans ended up being in the payment for under 5 years, they could just be released when it was a keen “excessive hardship” towards the borrower to settle the loan. In the 1978, the brand new Bankruptcy proceeding Code was amended to keep the exact same limit.
1979 – The 5-seasons payment several months requirements is extended of the one deferments and you will forbearances that had been pulled because of the debtor. Which limit towards dischargeability was prolonged beyond financing created by a beneficial government tool so you can financing insured, guaranteed otherwise funded by a national unit.
1981 – New 8th circuit (with Minnesota) founded a test to possess undue difficulty thinking about the “totality out-of affairs” to decide dischargeability.