Where there was sufficient evidence to corroborate the debtor’s credible testimony of medical disability indicating likelihood of her inability to work in the future, the second prong of Brunner is satisfied even though there may be more or better corroborating evidence the debtor could have presented. Nightingale v. North Carolina State Educational Assistance Authority, 2016 Bankr. LEXIS 1667, No. 13-10834, Adv. Proc. No.13-2060 (Bankr. M.D. N.C. April 14, 2016). Read More
Tag Archive: Student loans
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Compassion and Common Sense Enter Student Loan Discharge Arena
Posted by NCBRC - June 17th, 2016
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Certainty of Hopelessness that Judge Will See Reason
Posted by NCBRC - June 9th, 2016
In a sanctimonious opinion divorced from reality, devoid of compassion, and logically flawed, a district court for the Middle District of Alabama found that the debtor failed to establish a “certainty of hopelessness” with respect to future ability to pay off her student loans and directed the bankruptcy court to find the debts nondischargeable. ECMC v. Acosta-Conniff, No. 15-220 (M.D. Ala. May 2, 2016). Read More
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Kansas District Court Applies Brunner Test
Posted by NCBRC - March 22nd, 2016
The bankruptcy court failed to adequately consider all the relevant facts and circumstances when it granted discharge of the debtors’ student loan. Johnson v. ECMC, No. 15-2631 (D. Kans. March 2, 2016). Read More
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Student Loan Discharged Despite IBRP
Posted by NCBRC - December 14th, 2015
The debtor met his burden of establishing undue hardship for discharging his student loan despite eligibility for an income-based repayment program. Abney v. United States Dep’t of Educ. (In re Abney), 2015 Bankr. LEXIS 3849, No. 15-60501, Adv. Pro. 15-6027 (Bankr. W.D. Mo. Nov. 10, 2015). Read More
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Separate Treatment of Student Loan Must Not Unfairly Discriminate
Posted by NCBRC - November 18th, 2015
A debtor who seeks to treat her student loan differently under section 1322(b)(5) must demonstrate that such treatment does not unfairly discriminate between unsecured creditors under section 1322(b)(1). Jordahl v. Burrell (In re Jordahl), No. 15-6009 (B.A.P. 8th Cir. Nov. 2, 2015). Read More
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CFPB Sues Over Student Financial Aid Scam
Posted by NCBRC - November 4th, 2015
Taking advantage of confusion and concern over the costs of higher education, a financial aid scam has garnered millions of dollars in fees for bogus student loan financial services. The scam is run by Armond Aria using companies called Global Financial Support, Inc., Student Financial Resource Center and College Financial Advisory. The Consumer Financial Protection Bureau (CFPB) has filed a lawsuit against the companies and Aria in the District Court for the Southern District of California alleging that Aria and his companies violated the Dodd-Frank Wall Street Reform and Consumer Protection Act by misleading consumers about their services. Specifically the complaint alleges that the company issues marketing letters to students and their families offering to conduct searches to match students with individualized financial aid opportunities. The letters falsely represent affiliation with the government or academic institution and demand a fee ranging from $59 to $78 to conduct the search. Students are instructed to fill out an application and pay the fee in accordance with a meaningless deadline or risk losing the opportunity to receive financial aid. In return, the applicants receive either nothing at all, or a general booklet on financial aid. In fact, the Department of Education operates the Free Application for Federal Student Aid (FAFSA), a national program enabling students to apply for college loans and grants. There is no fee associated with this program.
The lawsuit seeks both injunctive relief to stop the unlawful practices and restitution for those consumers harmed by the illegal conduct.
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CFPB Reports on Student Loan Servicer Failures
Posted by NCBRC - October 13th, 2015
The CFPB has come out with a report detailing roadblocks to federal and private student loan repayment caused by student loan servicers’ sloppy practices. The report states that “41 million Americans collectively owe more than $1.2 trillion in student loan debt, making student loan debt the second-largest class of consumer debt behind mortgages.” One in four student loan borrowers are delinquent or in default on student loans. The CFPB received more than 30,000 responses to its notice to student loan borrowers requesting comments on student loan servicing.
Reported problems include:
- Difficulty accessing information about loan accounts and repayment programs,
- Incorrect information or inaccurate billing statements that are difficult to correct,
- Surprise fees and lost benefits caused when servicer changes result in lost account records, new policies or disrupted administration of accounts,
- Inaccurate payoff statements or surprise bills demanding extra payments,
- Incorrect classification as in default upon the death of a co-signer even though payments are current,
- Application of payments to costs and fees rather than to loan repayment.
Servicing problems raise concerns about whether debtors who fulfill the requirements for income-based lower monthly payment plans are receiving information about those plans, or are instead being steered into less-advantageous, short-term options like forbearance. The report noted that servicer mishandling of student loans may adversely affect older people, veterans and consumers with disabilities, disproportionately.
The report makes a number of recommendations intended to provide a roadmap for reform, including:
- Consistent, industry-wide, standards for the servicing market,
- Federal and state enforcement of consumer protection laws to hold servicers accountable,
- Requiring servicers to provide timely, accurate, information about loan repayment and alternative payment plans,
- Greater transparency including publication of servicer-level information on loan performance.
The CFPB offers a guide to navigate the repayment options through its Repay Student Debt tool.
CFPB Student Loan Servicing Report Sept 2015
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Proposed Bill Eliminates Student Loan Discharge Exception
Posted by NCBRC - September 15th, 2015
On September 8, 2015, Michigan Congressman Dan Kildee introduced a bill in Congress intended to reduce the burden on students and their families caused by the ever-increasing costs of higher education and the financial stress of student loans. H.R. 3451. The proposed legislation removes student loans from section 523(a)’s exceptions to discharge, thereby clearing the way for student loans to be discharged in bankruptcy just as credit card debts and car loans are currently dischargeable. In a statement issued by Mr. Kildee’s office, the necessity for the legislation was founded on his concern that “[s]tudent loan debt has soared in recent years, and there are now over 40 million federal and private student loan borrowers who collectively owe $1.2 trillion in student loans. The average student has $28,400 of loan debt, and total student loan debt in the U.S. has now surpassed credit card and auto loan debt totals.” In a press conference, Mr. Kildee explained: “It’s increasing[ly] clear that well educated society is absolutely necessary to a sustainable economy and to an equitable society that more fairly allocates the vast wealth that we create in this nation. The path to doing that is to make college affordable to more and more people. I think it’s important for us to remind ourselves that a college education for a young person in our state is valuable not just to them [but] for all of us and we should be willing to invest in it.”
Mr. Kildee also introduced two other bills dealing with student loans, one of which would exempt Pell Grants and scholarships from income taxes, and the other which would eliminate some private lenders’ unfair practice of automatically treating loans as being in default when a student’s cosigner dies even where the payments on those loans are current.
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Amici NCLC and NACBA Argue Brunner Test Outdated
Posted by NCBRC - July 31st, 2015
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
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Tuition Credit Dischargeable
Posted by NCBRC - April 2nd, 2015
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
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