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College graduates may find relief from their student debt

It is likely that many Connecticut residents either have one or more student loans or know someone who does. The overwhelming level of debt and difficulty paying it off has been well-documented recently in both national and local news.

The Connecticut Post reports that Connecticut college graduates have the third highest average student debt in the US and are ranked 20th regarding how the indebtedness affects them after graduation. Except for a mortgage, student loans are the most significant component of the average household debt. In this situation, the level of student loan debt is calculated using five factors that include the following:

  • Share of student loan borrowers 50 and older
  • Percentage of graduates with student loan debt
  • Share of student loans categorized as past-due or in default
  • Average student debt
  • Student debt to income ratio

As the student loan debt balloons, it is not uncommon for borrowers to consider bankruptcy.  However, according to Forbes, establishing financial hardship is required for this debt to be discharged. The Brunner test is the legal measuring stick that courts use to decide whether the student loan can be released. It requires that the borrower made good faith attempts to repay their debt, there are extenuating circumstances and that those circumstances are not temporary.

Before 1976, student loans in repayment for five years could be removed. Today, a lawsuit within the bankruptcy court must be filed to discharge the debt due to hardship. For college graduates struggling to make student loan payments, there are options to help alleviate the burden, from filing Chapter 13 to enrolling in a repayment program. 

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