As this graph illustrates, student loan debt has exploded in the past decade, and now tops total outstanding American credit card debt. However, the truly frightening aspect of student loan debt is the inability to discharge the debt through declaring bankruptcy and filing bankruptcy proceedings in court. Essentially, even if an individual cannot afford the monthly payments and files for bankruptcy, student loan debt cannot be wiped clean and you will be forced to continue making payments regardless of your ability to pay or not. As someone who already has some student loans and is looking at my options for taking on more to help pay for law school tuition, I try to stay updated on news and developments surrounding student loans.
Last week, there was a significant ruling by the 9th Circuit U.S. Court of Appeals that wade into uncharted waters with regard to discharging student loans through bankruptcy. Under current bankruptcy law passed by Congress in 2005, student debt cannot be discharged solely through a bankruptcy proceeding, rather an adversary proceeding, a separate lawsuit within the bankruptcy case, must be filed where the borrower is required to prove an "undue hardship". Most students either are unaware of their options, or simply cannot afford the attorney and other costs related to discharging student debt. Complicating the issue further is the fact that the "undue hardship" aspect of the law is not standardized and varies from court district to court district across the country. In the Court of Appeals case Michael Hedlund borrowed around $85,000 to pay for his undergraduate and law school degrees, however he was unable to afford his monthly payments and filed for bankruptcy. The Court of Appeals reversed a lower court and allowed Mr. Hedlund to discharge some of his loans and rejected claims that the husband and father should find additional part-time work on top of his full-time position. The ruling also established that something like leasing a car cannot be considered an "excess expense" by a court and gave hope to thousands of other students drowning in debt.
Before I read the case brief I wanted to brush up on the basic facts of student loan debt in the U.S., so one of the first sources I turned to was Wikipedia. Since this case was not heard before the Supreme Court it was not on Oyez.org, and I really was simply looking to gain basic facts. While the Wikipedia page on student debt is helpful, I noticed it was slightly outdated with regard to ways the loans can be discharged as decided in the Hedlund case. I have never attempted to edit Wikipedia, but I figured now would be as good as any to try! Here is the original paragraph:
U.S. Federal student loans and some private student loans can be discharged in bankruptcy only with a showing of "undue hardship." In contrast to credit card debt, which often can be discharged through bankruptcy proceedings,[27][28][29][30] this option is not generally available for educational loan debt.[31][32][33] The undue hardship standard varies from jurisdiction to jurisdiction, but is generally difficult to meet, making student loans practically non-dischargeable through bankruptcy. In most circuits discharge depends on meeting three prongs in the Brunner test:[
And here is the paragraph after I made some basic revisions:
U.S. Federal student loans and some private student loans can be discharged in bankruptcy only with a showing of "undue hardship." In contrast to credit card debt, which often can be discharged through bankruptcy proceedings,[27][28][29][30] this option is not generally available for educational loan debt.[31][32][33] Additionally, those seeking to discharge their student loan debt must initiate an adversary proceeding, a separate lawsuit within the bankruptcy case where they illustrate the required undue hardship[34]. Many borrowers cannot afford to retain an attorney or the additional litigation costs associated with an adversary proceeding, let alone a bankruptcy case. Further complicating matters, the undue hardship standard varies from jurisdiction to jurisdiction, but is generally difficult to meet, making student loans practically non-dischargeable through bankruptcy. In most circuits discharge depends on meeting three prongs in the Brunner test:[35]I found the Appeals Court case to be relevant to myself, as well as the thousands of other Millennials with similar situations. Editing Wikipedia was a first for me, but I hope it helps others out there with some basic facts about the complex web of student loans in the U.S.
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