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).”
Tag Archive: Student loans
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College Students Underestimate Their Student Loan Debt
Posted by NCBRC - December 19th, 2014
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Student Loan Debtor May Reject Zero-Payment Plan in Good Faith
Posted by NCBRC - December 11th, 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
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Contrasting Cases on Undue Hardship and Summary Judgment
Posted by NCBRC - December 5th, 2014
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
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Tuition Deferment Dischargeable
Posted by NCBRC - June 16th, 2014
“[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
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Unpaid Tuition Balance not Student Loan
Posted by NCBRC - November 11th, 2013
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
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Student Loan May Be “Special Circumstance” under Section 707(b)(2)(B)(i)
Posted by NCBRC - October 2nd, 2013
In a fact-specific analysis, the court in In re Bradley found that the debtors’ nondischargeable student loan debt constituted a “special circumstance” that could be used to adjust current monthly income to rebut the presumption of abuse otherwise created by the means test calculation under section 707(b). 2013 WL 4663125 (Bankr. S.D. Ala. Aug. 30, 2013). Read More
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Hardship Test Supports Discharge of Student Loan
Posted by NCBRC - September 23rd, 2013
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
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Factual Findings in Student Loan Discharge Case Reviewed for Clear Error
Posted by NCBRC - May 28th, 2013
Dischargeability of student loans is often determined by application of the test set forth in 1987 case of Brunner v. New York Higher Education Services Corp., 831 F.2d 395 (2d Cir.). The Ninth Circuit recently discussed the proper standard of review when the third prong of that test—good faith—is at issue. Hedlund v. ECMC, No. 12-35258 (9th Cir. May 22, 2013). Read More
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Some Hope for Student Loan Debtors
Posted by NCBRC - April 19th, 2013
Two recent student loan cases shine a ray of hope for debtors crushed by education-based debts. See Kreiger v. ECMC, No. 12-3592 (7th Cir. Apr. 10, 2013) and Roth v. ECMC, No. 11-1233 (B.A.P. 9th Cir. Apr. 16, 2013). Read More
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Fairness for Struggling Students Act
Posted by NCBRC - January 28th, 2013
Illinois Senator Richard Durbin began the 113th Congress by reintroducing the Fairness for Struggling Students Act of 2013, S. 114, proposing to make private student loans, like other consumer debts, dischargeable in bankruptcy. In presenting the legislation, Senator Durbin said:
The first two pieces of legislation I will introduce this Congress deal with what I think is one of the biggest threats to millions of working families – the growing student loan debt crisis. Too many Americans are carrying around mortgage-sized student loan debt that forces them to put off major life decisions like buying a home or starting a family. It’s not only young people facing this crisis, it is parents, siblings and even grandparents who co-signed private loans long ago and are still making payments decades later. It’s time for action. We can no longer sit by while this student debt bomb keeps ticking.”
Federal student loans have been essentially non-dischargeable since 1978 but it was not until the Bankruptcy Code underwent upheaval in 2005 that private student loans were accorded the same favored treatment. Although private student loans comprise only about 20% of the total student loan debt, private loans tend to be substantially more onerous for borrowers. They typically have higher interest rates, limited or no availability of deferment or forbearance, and no income-based repayment plans. In addition, they are not subject to the consumer protections in place for federal student loans.
Senators Jack Reed (D-R.I.), Sheldon Whitehouse (D-R.I.), Al Franken (D. MN), Tom Harkin (D-IA), and Elizabeth Warren (D-MA), are co-sponsors of the bill. Other organizations that have publically called on Congress to amend student loan treatment in bankruptcy are the American Association of University Women, the Consumer Financial Protection Bureau, the U.S. Department of Education, The Institute for College Access and Success, and Sallie Mae.
NACBA has actively fought for a return to pre-2005 treatment of private student loans and NACBA members have an opportunity to make their voices heard at the 2013 Capitol Hill Meeting in Washington on February 26-27. You can register for this event through the NACBA website, www.NACBA.org.
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