Degrees of Inequity: A Policy and Strategic Alternative Assessment to Identify a Twenty‐First Century Definition of Undue Hardship for Student Loan Debt in the United States
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Date
2020-12-18
Type of Work
Department
University of Baltimore. College of Public Affairs
Program
University of Baltimore. Doctor of Public Administration
Citation of Original Publication
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This item may be protected under Title 17 of the U.S. Copyright Law. It is made available by the University of Baltimore for non-commercial research and educational purposes.
Subjects
Student Loans
Student Loan Discharge
Brunner Test
Marie Brunner
Totality of the Circumstances test
Bankruptcy Reform Act of 1978
Public Law 95-598
Bankruptcy Abuse Prevention and Consumer Protection Act
Public Law 109-8
Discharge Tests
Undue Hardship
Undue Hardship Standards
Student Loan Debt
Student Loan
Loan Discharge
College Cost
College Affordability
Equal Protection in Education
Elements of Undue Hardship
Standard Budgeting
Studies on Standard Budgeting
Educational Equality
Educational Equity
Higher Education Act of 1965
Student Loan Discharge
Brunner Test
Marie Brunner
Totality of the Circumstances test
Bankruptcy Reform Act of 1978
Public Law 95-598
Bankruptcy Abuse Prevention and Consumer Protection Act
Public Law 109-8
Discharge Tests
Undue Hardship
Undue Hardship Standards
Student Loan Debt
Student Loan
Loan Discharge
College Cost
College Affordability
Equal Protection in Education
Elements of Undue Hardship
Standard Budgeting
Studies on Standard Budgeting
Educational Equality
Educational Equity
Higher Education Act of 1965
Abstract
This study was undertaken to address issues resulting from the vagueness of
imprecisely defined legislative language located in the Bankruptcy Reform Act of
1978 (Public Law 95-598) and subsequent policies, regulations, and laws such as the
Bankruptcy Abuse Prevention and Consumer Protection Act (Public Law 109-8);
which relate to the dischargeability of federally insured student loans.
Prior to Public Law 95-598, student loans could be discharged with de minimis
limitations, but undertaking the same task afterward became harder due to a lack of
clear Congressional guidance regarding the term “undue hardship” used in the law.
As a result, bankruptcy courts created the Brunner test and the Totality test to
determine discharge eligibility, and these tests serve as de facto national standards.
In the absence of a declarative ruling from the Supreme Court—or preferably,
legislative direction—petitioners will continue to be subject to different circuit-based
juridical standards to discharge student loans. A related focus of this study was to
examine student loan affordability in respect to contemporary living conditions.
The major findings of the study acknowledge agencies and courts have
administrative discretion, but the Brunner and Totality tests are vastly divergent, so
similarly situated debtors in different jurisdictional venues will experience dissimilar
outcomes under the same law. Secondly, what was an undue hardship in 1978 is
vastly different than what constitutes an undue hardship today. Finally, the discharge
standards are outdated and require a contextual revision to reflect contemporary life.
The major recommendations from the study include revamping the discharge
tests, aligning loan interest rates with inflation, limiting collection fees, revising
satisfactory academic progress requirements, ending wage garnishments without
advance notification, reinstituting the statute of limitations, and clarifying/defining
national undue hardship standards, with adjustments for regionally-based costs.
These recommendations acknowledge that the government has the right to
ensure that its loans are collected, and the responsibility to not be so oppressive in its
enforcement pursuits that educational discharge equities are elusive and promotes
poverty by requiring petitioners to be impoverished in order to receive a discharge.
Historically, the federal government’s policies on promoting postsecondary education
as an investment is Janus-faced when juxtaposed with its policies on repayment of that
investment. Implementing these recommendations will lead to the fresh start
supported by Congress in the Bankruptcy Code, ending the system of two national
student loan discharge standards with their dual degrees of inequity.