Are you Eligible for Student Loan Relief?
As a lawyer, I know firsthand how much debt a person can accumulate in the course of getting an education. If you’re lucky, your family made enough money to pay for your college and perhaps post-graduate education outright, you were eligible for grants and scholarships or you may just have been so brilliant that colleges were beating down your door and paying for you to attend their school. For the rest of us, there were student loans -- and for some, the resulting debt can be crushing.
Only one in four who attends a four-year college actually graduates. Once you graduate, there is no guarantee that you get any job, let alone the job you “planned” to get. My first week of law school marked 9/11, resulting in economic turmoil and hiring freezes that still weren’t resolved when I graduated in 2004. I was fortunate to obtain a prestigious clerkship and get into a solid law firm. Not everyone is so fortunate.
In my experience, there is no one reason people cannot repay their student loans. Some people have (or develop) physical and mental disabilities that create barriers to their ability to produce income. Others have to forgo their ambitions to care for friends or family members who need them. Divorce can be devastating for even educated spouses who might have spent their career-building years taking care of children. On the flip side, divorce can result in the working spouse funding two households with a single income. Luckily, for some of those people at least, there is relief.
Contrary to popular belief, obtaining a student loan discharge -- or sometimes partial relief -- is not impossible. It is true that the standard is very high; to receive a discharge of a student loan in bankruptcy, a debtor must establish undue hardship. In New York, this means a debtor must establish, based on current income and expenses, that (i) they cannot maintain a minimal standard of living for themself and their dependent(s) if forced to repay the loan, (ii) this state of affairs is likely to persist for a significant period of the loan repayment program and (iii) they have made good faith efforts to repay their loans. That said, there are people who meet this criteria.
Additionally, when faced with a complaint seeking to discharge a student loan, creditors must do a risk assessment. They must weigh their desire to obtain payment against the chance that they lose, in which case there may be unfavorable case law they must overcome in the future. I once represented a young woman who was educated and presented very well. Despite this, she suffered from mental illness and was unlikely to be able to work on a steady basis. She was very young, had no dependents, and a supportive family. Ultimately, the lenders weighed their options and agreed to release her from her obligations rather than take the chance that they might lose in court.
There are also signs that at least some members of the judiciary may believe the loss and burden should be shared between the parties. While not binding on courts in New York, a Massachusetts bankruptcy court recently denied a debtor’s complaint seeking to discharge her student loan debt, but conditioned the denial on the debtor’s eligibility to participate in an income-based repayment program under which all remaining debt would be forgiven after she made payments for 20 years. In re Tamara Sara Parvizi (Tamara Sara Parvizi v. United States Department of Education, Great Lakes Borrower Services), 2021 WL 1921121 (Bankr. W.D.Mass. May 12, 2021). The debtor in his case had more than $650,000 in student loan debt, was very well-educated, had no dependents, no physical or mental disorder and never seemed to make any good faith effort to repay her loans, choosing to work in teaching rather than pursuing a possible career in medicine. The Parvizi Court reasoned that, while making payments under the income-based plan was not undue hardship for the 51-year old, it would be undue hardship for the debtor once she reached her 70’s. Accordingly, if the debtor was not deemed eligible for the income-based repayment program, she would be allowed to renew her request for a discharge.
Discharging a student loan is difficult, but not necessarily impossible. If you believe that your student loan debt poses an unsustainable burden, call us to see if you may be eligible for a discharge.
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