Part 2 of 2
Myrna had also worked in the public health sector, which under later law, would have forgiven her loans after 10 years of service. So, using those factors, I decided that she only needed to pay for three more years, based upon her income level, and the student loan debt would be forgiven. The parties later stipulated to a form of judgment consistent with my ruling.
How did we ever get to such a place? Under the prior bankruptcy law, student loans were treated like any other consumer debt. They were routinely forgiven. But in 1976, an Amendment to the Higher Education Act that also amended the bankruptcy law changed the game. It required that education loans not be forgiven unless a period of five years after the loan was entered into had passed or the borrower could show that he or she would experience an "undue hardship" if the loan were repaid. It was left up to the courts to determine what undue hardship meant. The Bankruptcy Reform Act of 1978, the "Bankruptcy Code," incorporated the changes.
In 1990, the Crime Control Bill changed the waiting period from five to seven years, and added additional types of loans that were difficult to forgive under the Bankruptcy Code. Finally, on October 7, 1998, President Clinton signed the Higher Education Act Amendments, which eliminated the waiting period altogether. Then, only undue hardship could "free" a borrower from student loan debt in bankruptcy.
Today it is extremely difficult for student loan borrowers to get relief in bankruptcy. Under the current bankruptcy law, borrowers must meet the test set forth in a 1985 case called "In re Brunner," which introduced three criteria of "undue hardship" borrowers must meet before their debt is forgiven: The borrower is living at the poverty level, will continue to do so for the foreseeable future, and has made good faith efforts to repay the student loan debt.
If a debtor cannot meet one of the criteria, the debt cannot be discharged. "In re Brunner" is followed, with some modification, in nearly all of the United States Circuit Courts of Appeal.
This standard is unjust and misguided. It's time to reverse the damage done by these laws.
Too many Americans are hampered in their ability to advance economically by student loans. Moreover, there is a racial justice element to this. Research has shown that Black and Hispanic students are disproportionately affected by the student debt crisis. They are more likely to attend for-profit colleges that don't lead to high-paying careers, and they borrow more money to attend. Black college graduates owe an average of $25,000 more in student loan debt than white graduates.
We have a crisis. At the end of the first quarter 2022, Americans owed $1.59 trillion in student loan debt according to the Federal Reserve Bank of New York, an increase of $14 billion over the fourth quarter 2021. On May 31, 2022, the Department of Education announced that it would automatically wipe out $5.8 billion owed by 560,000 borrowers who attended the for-profit Corinthian Colleges because of the chains' "bad behavior."
https://www.newsweek.com/dont-cancel-student-loans-let-bankruptcy-law-forgive-them-opinion-1717664