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Significant Changes in Student Loan Debt Law

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This fall has seen the most substantial and consequential revisions to the area of student relief in the last 25 years.  While much of it is not finalized, if you have any consequential amount of student loan indebtedness, you should be aware of these changes.   These potential game-changing revisions include:

  • For-Profit Schools: Court approval of the Sweet v. Cardona Class Action settlement identifying numerous for-profit schools deemed predatory in their student loan practices and subject to debt forgiveness.  More information can be found directly at https://www.ppsl.org/sweet-v-cardona-class-members.
  • Loan Forgiveness: The announcement in September by President Biden of a $10,000 loan forgiveness plan (up to $20,000 dependent on the type of loan) for federal student loans.  This plan however is under attack in the Courts and will go to the U.S. Supreme Court to determine its legality.   In response, however, the President has extended the current deadline for Covid related loan deferments.
  • Undue Hardship: On November 17th, the United States Department of Justice announced a potentially monumental revision in the manner the Department of Education will approach the issue of undue hardship for Discharge of Student Loans in Bankruptcy. For over twenty years (prior to 1998 student loans were dischargeable in Bankruptcy after a minimum number of repayments years), the standard for “undue hardship” to discharge a student loan in Bankruptcy has been a fairly draconian standard called the Brunner test which most Courts ruled that only the most serious and permanent disabilities were excepted from the  non-dischargeability standard. Visit: https://www.justice.gov/opa/pr/justice-department-and-department-education-announce-fairer-and-more-accessible-bankruptcy 

With this guidance, it seems likely that this standard will substantially loosen and many individuals with compelling financial difficulties will find an avenue to eliminate or reduce their student loans through the use of an Adversarial Proceeding in a Chapter 7 or 13 Bankruptcy filing.   Many details are yet to be finalized and the full degree of how this is implemented by the Bankruptcy Courts remain to be determined, but it is indeed a very hopeful development. 

We encourage all those with substantial and difficult to pay student loan indebtedness to schedule a consultation to discuss the possible options of relief.