ECMC’s main contention in their appeal is that Rosenberg was licensed to practice law but did not pursue job opportunities in the same field: “Instead of pursuing those opportunities available to him, and paying back his taxpayer-backed federal student loans, Plaintiff, for the past 10 years, has held various positions in the outdoor adventure industry, including starting up and running his own tour guide business.”
The loan servicer also implied that Judge Morris’ interpretation of the Brunner test was lax.
“Inability to pay one’s debts by itself cannot be sufficient to establish an undue hardship; otherwise all bankruptcy litigants would have an undue hardship,” they stated. “The Bankruptcy Court in the case at hand rejected 32 years of case law applying the Brunner test in order to determine, on summary judgment, that Plaintiff met his burden to establish an undue hardship, thereby discharging Plaintiff’s entire student loan debt of approximately $221,385.”
A case where the lender is appealing. Definitely case/fact specific. I say be careful what you wish for…unintended consequences might hurt the majority of future borrowers.
This navy veteran case and med student case is apple and orange. One has license vs other doesn’t. One decided to pursue other career and other didn’t get any offer inspite of all efforts a human can do. I am sure navy guy has assets that servicer thinks may be able to recoup some money vs other guy who has no assets.
well even you appeal and you win the case, guy is not going to pay a dime and keep continue the jobs he has been doing for rest of life. Lender only appeals if they smell green, otherwise they will just waste more money in lawyer fees.
I was reading Brookings article and it is fascinating from debt SS that once you cross 80K debt, the trend over last 4 years for outstanding debt and number of borrowers are consistently going up. Below 80K both trends remain more or less static.
They may not. However, they may pursue it if they feel the court applied the test erroneously like the lawyer case. As a lender I’d be concerned about setting precedent with the case. Also interesting that they capped his earnings through 58. Seems a bit on the young side to be retiring from the workforce.
The lender in the Duke/Puerto Rico med school case is the Dept of Ed, and they are not going to appeal (it says so in the article I read, which may be different than the one posted). I think that case is very specific. If he had applied for forgiveness from the Dept of Ed, he may have received a hardship forgiveness, but then that forgiveness is taxable as debt forgiveness. They are really using the wrong term in Bankruptcy court ‘forgiving’ the debt. The bankruptcy court makes the stay permanent, meaning the lender(s) can’t collect. The debt is still there so no forgiveness tax.
One solution to the existing debt is by forgiveness by Biden in an executive order or by Warren/Schumer act in congress. That doesn’t really fix any problems ongoing. Congress could also allow private or government debt to be included in a bankruptcy filing. It’s not as easy as it sounds as since they’ve changed the bankruptcy rules in 1986, they have also changed the banking laws in 2010 (Dodd-Frank Act). Banks now have limits on how much unsecured debt they can have on the books and student loans were in a difference category since they couldn’t be included in a bankruptcy filing. Most banks don’t make small, unsecured loans. Need $500k and you are a Fortune 500 company? Sure, but if you want $10k and you are an average Joe? No, the bank will want some security. I think most banks would decide there wasn’t enough profit in lending unsecured money to students who could just have it made uncollectable (especially at today’s low rates). The source would dry up and students would be limited to government programs. That may not be a bad thing, but it does limit options, especially for lower SES groups.
So I don’t think Biden will forgive even $10k by executive order, I don’t think Warren will get $50k forgiveness passed, and I think it will be more complicated than it seems to ‘just change the bankruptcy law.’ So, I think things will just go on as they are now for a while.
This proves how easy money from the government is allowing schools to continue to raise tuition rates. If you remove the easy money from the government (student loans), you would see a free-fall in tuition.
You don’t have to be a doctor to qualify for PSLF. Other folks could qualify this as well. Are you saying that anyone who makes 120 payments should not receive some loan relief?
Qualifying Employer
Qualifying employment for the PSLF Program isn’t about the specific job that you do for your employer. Instead, it’s about who your employer is. Employment with the following types of organizations qualifies for PSLF:
Government organizations at any level (U.S. federal, state, local, or tribal)
I am not sure what 120 or 240 has to do with it. PSLF also heard horror stories that after spending considerable amount of time on it somehow they are ruled not eligible. There is lots of gray area for that and its interpretation is vague, should be better guidelines and one should know upfront of they will be eligible or not, rather than way after.
PSLF has strict rules, and it’s not hard to mess up. For example, if your payment is $100/month & you decide to pay $300 one month, you are “paid ahead” for the next two months. If you make payments in those two months, they don’t count toward the 120 payments it takes for forgiveness. (You can call the servicer to request that you NOT be considered in paid ahead status for those months, but you have to do that.). You have to document all hours worked for the 120 months, and borrowers don’t always remember to do that (it’s hard to get that years later). You have to be in a qualifying job at the time forgiveness is granted (not requested), so you will have to stay in a qualifying job months beyond the 120 months (and of course, you have to keep making payments during that time). You have to keep copies of everything you submitted (and everything your employer submitted), in case the servicer loses it. It’s not easy to get forgiveness. It’s incredibly important to stay on top of every detail from beginning to end. It’s not gray area, because the rules are published and followed … it’s just not easy to be in full compliance. That is what has tripped people up. And I can’t say for sure whether the servicer may have lost documents, or whether the Department of Education may have messed something up … but I always warned my graduates to keep copies of EVERYTHING. I know it shouldn’t be that hard, but it is.
sounds like one may need an administrative assistant to keep track of all nuances. and procedure/processes are designed to weed out more than grant forgiveness to more.
I am dealing with personal situation, my son loan portfolio sold last year from comp A to B. Comp B doesn’t even have record of some payment he has made to comp A. They asked for payment proof to us, luckily he had paid through his bank account as ACH and submitted that proof, still even after 2+ months they need more time to look into it. For all the horror stories out there, I don’t trust servicers, it give me a feeling they act more like gotcha.
Interesting tidbit that just came through from my accountant - Senate bill passed over the weekend contains a provision that any student loan forgiveness passed between 12/31/2020 and 1/1/2026 will be tax free (there will be no cancellation of indebtedness income for the beneficiaries that they would normally have to pay tax on). Looks like they are laying the groundwork by putting this provision into a large omnibus bill.
According to higher education expert Mark Kantrowitz, “It would also seem to make forgiveness after 20 or 25 years in an income-driven repayment plan tax-free.” This is a pretty big deal. It would only be for loans forgiven during the prescribed timeframe, but Congress could always extend it later, if they choose to do so. This is an interesting turn.
And yes, that is a problem as after you spent all those years and learned at end that you are starting from square one. It is obvious that so many borrowers failed to meet requirements due to bureaucratic red tapes. Harvard admission would be much easier than qualifying for forgiveness.
I take issue with considering loan forgiveness a flop based on the fact that so few have qualified for forgiveness at this point in the game. The early income driven plan was ICR, not a particularly attractive plan, and it required that loans had to be Direct Loans. The majority of loans were FFEL at that time, and consolidating into a Direct Loan would likely create a bigger loan amount. I don’t see any stats detailing whether any loans that should have been forgiven, meaning that they were enrolled in ICR and met all criteria for forgiveness, were not forgiven.
The issues cited seem to be that borrowers should have been able to get into a plan leading to forgiveness but did not, based on servicer actions (or lack of action). This is something with which I agree.
I would say that it will be more telling when IBR loans hit 20 years. That plan started in 2009, so it will be a few years. I do believe that servicers do things that keep borrowers from being able to benefit. They sometimes push forbearance rather than IDR, and they sometimes make enrolling in and remaining in the plan difficult (I know this from trying to help students/grads). Congress can help with this by putting rules in place that make enrollment and recertification much easier. Servicers also need to better train their representatives. From my discussions with servicer reps, I didn’t get the feeling they were trying to do the wrong thing … I felt more like some phone reps didn’t really know what they should have recommended.