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More on "Undue Hardship" and Student Loans in Bankruptcy

posted by Pamela Foohey

Following up on Bob's post earlier this week about the Department of Education's request for information (RFI) regarding evaluating "undue hardship" claims in adversary proceedings to discharge student loans, a group of 23 academics, including myself, also submitted written comments in response. The effort was spearheaded by Slipster Dalié Jiménez. Matthew Bruckner (Howard Law), Brook Gotberg (Missouri Law), and Chrystin Ondersma (Rutgers Law) also were part of the drafting team.

Our primary recommendation is that the Department establish ten categories of borrower circumstances under which the Department would agree to the borrower’s discharge of federal student loans. As with the ABI Commission on Consumer Bankruptcy's comments (and the National Bankruptcy Conference's comments), our categories are designed to offer objective criteria for when the Department should agree to a discharge of student loans. The overall aim of the proposal is to establish clear, easy-to-verify, dire circumstances that merit the Department’s acquiescence to a student loan discharge and thereby promote the efficient use of taxpayer funds. To this end, we also recommend that the Department accept "reasonable proof" that a borrower fits into one of the ten categories without engaging in formal litigation discovery. Our response also calls on the Department to collect and release more data about federal student loans.

Comments

To give, or perhaps take, credit where credit is due, the safe harbor criteria were suggested to the Department of Education several years back in a Dear Colleague Letter from a group of Democratic Senators, lead by Dick Durbin, based on ideas from NCLC and NACBA.

Indeed. In our response, we discuss the Dear Colleague Letter. And we explicitly note that our proposal is inspired by the letter, that some of our recommendations are very similar to those in the letter, and that some of our recommendations go further than the letter.

Absolutely, Ed. For those interested, that letter is available here: https://cohen.house.gov/press-release/cohen-6-members-congress-urge-education-secretary-bring-more-fairness-struggling

As Pamela noted, our proposal drew from this letter. I'd also point out that the American Bankruptcy Institute's Commission on Consumer Bankruptcy's response also drew from the letter.

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