ADEA State Update

Bankruptcy Standards for Student Loans May Get a Fresh Look

(Department of Education, Financial Aid, Higher Education) Permanent link   All Posts

StudentDebtCoinsOn Feb. 21, the U.S. Department of Education issued a request for information and public comment on the process for evaluating claims of “undue hardship”—the standard that student borrowers must meet to be able to discharge their student loans through bankruptcy proceedings.

It is quite difficult to get student loans discharged through bankruptcy. Congress has not defined the term “undue hardship” in the U.S. Bankruptcy Code and has not delegated the authority to do so to the Department of Education. The federal courts have established the legal standard for a student loan debtor to prove “undue hardship” as authorized by Congress. Generally, the undue hardship test requires several factors to be evaluated when determining whether repaying a debt will cause a debtor and his/her dependents an undue hardship, such as (but not limited to) the debtor’s: 

  • Medical, work or family history.
  • History of mental illness.
  • Level of educational attainment.
  • Future employment prospects.
  • Payment history and borrower’s willingness to consider all available repayment plans, including income driven repayment plans.

Comments on the request for information are due May 22, 2018.

Duggan Dental