Student loans are crippling for many households. The cost of education has skyrocketed, with students and their parents forced to take loans to meet the cost. The student loan crisis can be said to have surpassed our prior mortgage crisis, with millions of borrowers defaulting on payment of their loans. You may be a borrower of a Parent Plus loan, private loan, direct loan, FFEL loan or other having trouble paying on your loan. You are not alone. Student loan litigation (attempting to discharge fully or partially student loans) is gaining steam, with the leading case on the issue (the three prong test of In re Brunner) and its requirements for hardship discharge weakening.
The first step in any student loan analysis is to determine what type of loans you hold. You can view your loan at www.studentaid.gov. If the loan isn't present there, it's almost always a private loan. If detailed there, it is a federal loan. The type of loan will give your attorney an idea of what solutions exist for rehabilitation or discharge of the loan if in defaulted status. There is no central clearing house for private loans, though a credit report can be of some help.
If considering attempting a hardship discharge, Brunner must be understood. The Brunner test is as follows: 1) the debtor cannot maintain, based on current income and expenses, a "minimal" standard of living for the debtor and any dependents if forced to repay the loans; 2) that additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period; and 3) that the debtor has made good faith efforts in the past to repay the loans. Past, present and future hardship must be proven – a steep task!
Bankruptcy is a useful tool to give a student loan borrower breathing room to manage their debt. If a case for hardship discharge cannot be made at the time of the filing of the bankruptcy, it can be attempted near the end of a chapter 13 case. A discharged and closed chapter 7 or 13 case can be re-opened for the purpose of filing litigation to seek a hardship discharge. If your circumstances don't qualify you for a hardship discharge, there are still many options for special treatment in chapter 13. Most private loans have a co-signer who could be protected in a chapter 13 under 11 U.S.C. §1301.
Student loan law/litigation is a complicated area of the law and ever changing. Our attorneys charge a small consultation fee for analysis of these loans and to provide options. If you would like assistance in learning about defenses to repayment (statute of limitations, not a qualified education expense, truth in lending violations, hardship discharge or other), please schedule a time to meet with one of our attorneys and learn your options.