Financial Counseling Certification Program (FiCEP) Practice Exam

Which of the following statements about discharged student loans is accurate?

1. They can always be discharged in bankruptcy

2. Most cannot be discharged in bankruptcy

3. They are easier to manage in retirement

4. They are always forgiven after a certain age

The correct answer is: Most cannot be discharged in bankruptcy

The statement regarding most discharged student loans not being able to be discharged in bankruptcy is accurate. Federal student loans, in particular, have a unique legal status; they are generally not dischargeable through bankruptcy, except under extreme circumstances. This rule is designed to help ensure that individuals prioritize the repayment of their education, as it is seen as an investment in their future. While there are ways to have student loans discharged, such as through programs like Public Service Loan Forgiveness or if the borrower becomes totally and permanently disabled, these are exceptions rather than the norm. This highlights the difficulty many borrowers face during financial challenges, underscoring the importance of understanding their obligations and options when dealing with student loan debt. To address the other options, while some student loans can be discharged in bankruptcy under certain conditions, it is not an easy process. They are not inherently manageable in retirement since borrowers are still responsible for repayment unless discharged or forgiven. Lastly, age alone does not guarantee forgiveness of student loans, as forgiveness is contingent on specific programs or qualifications rather than simply reaching a certain age.