Student Loans

NCLC and NACBA filed a joint amicus brief in the First Circuit Court of Appeals seeking to lessen the burden on debtors trying to discharge student loans based on undue hardship. Murphy v. U.S. Dept. of Educ., No. 14-1691 (filed July 29, 2015). [Read more…] about Amici NCLC and NACBA Argue Brunner Test Outdated

Where the debtor did not actually receive any funds, her debt based on a tuition credit agreement with a for-profit institution was not excepted from discharge under section 523(a)(8)(A)(ii). Institute of Imaginal Studies v. Christoff, No. 14-1336 (B.A.P. 9th Cir. March 27, 2015). [Read more…] about Tuition Credit Dischargeable

Based on a study using data drawn from two sources linking student survey responses to administrative records on cost and borrowing, a Brookings Institution report has concluded that “a significant share of undergraduate students do not understand how much they are paying for college or how much debt they are taking on.” The report indicated that 28% of college freshmen who have taken out federal student loans do not think they have any federal debt, and 14% do not realize that they have any debt at all. Not only does a large percentage of students fail to grasp the extent or nature of their loans, but only a bare majority of college freshmen (52%) could estimate their actual costs of college within $5,000 accuracy. The report concludes: “It is possible, even likely, that this lack of knowledge will cause students to be surprised when their financial circumstances become apparent, perhaps when their first loan payment comes due. This surprise, or even fear, may impose an emotional burden on borrowers. More broadly, it may contribute to popular narratives about crushing student loan burdens, which are inconsistent with the reality that these burdens remain manageable for most borrowers (Akers and Chingos 2014).”

Finding the debtor to be “honest but unfortunate,” the bankruptcy court discharged her student loans so that she could “sleep at night without these unpayable debts continuing to hang over her head for the next 25 years.” Lamento v. U.S. Dept. of Educ. No. 14-1054 (Bankr. N.D. Ohio Oct. 31, 2014). [Read more…] about Student Loan Debtor May Reject Zero-Payment Plan in Good Faith

Speculation, begging the question, and the absence of countervailing evidence doomed the debtor’s defense to a motion for summary judgment on her student loan discharge action. Markwood v. U.S. Dept. of Educ. (In re Markwood), No. 13-1390, Adv. Proc. 14-4 (Bankr. N.D. W.Va. Oct. 31, 2014).

The court applied the three-part test developed in Brunner v. New York State Higher Educ. Servs. Corp., 831 F.2d 395, 396 (2nd Cir. 1987) (per curiam): “(1) that the debtor cannot maintain, based on current income and expenses, a “minimal” standard of living for herself and her dependents if forced to repay the loans; (2) that additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period of the student loans; and (3) that the debtor has made good faith efforts to repay the loans.” The court found the debtor failed the first two prongs of this test. [Read more…] about Contrasting Cases on Undue Hardship and Summary Judgment

“[W]hen a private educational institution finances a deferred payment of its tuition and related fees owed by one of its students that did not involve a third-party loan or an exchange of funds,” the debt is not excepted from discharge under Section 523(a)(8). Institute of Imaginal Studies v. Christoff, No.13-10808, A.P. 13-3186 (Bankr. N.D. Cal. June 11, 2014). [Read more…] about Tuition Deferment Dischargeable

The failure to pay tuition did not result in nondischargeable debt. So said the court in In re Oliver, No. 12-4185 (Bankr. S.D. Ind. Oct. 8, 2013). [Read more…] about Unpaid Tuition Balance not Student Loan

The Bankruptcy Appellate Panel for the Eighth Circuit found that there was insufficient evidence of the student loan debtor’s “reasonably reliable future” income to support the bankruptcy court’s finding that her student loan was nondischargeable. Conway v. National Collegiate Trust (In re Conway), No. 13-6016 (Aug. 21, 2013). [Read more…] about Hardship Test Supports Discharge of Student Loan