I've posted nearly ad nauseam on the state of student loans in America (see the most recent here which links to even earlier ones). Many nations subsidize higher education directly but the U.S. federal government has instead chosen to subsidize loans to students. Private lenders make the loans but federally created corporations provide a virtually unlimited secondary market so lenders really have no "skin in the game" as it might be put colloquially.
I've also observed that § 523(a)(8) of the U.S. Bankruptcy Code makes student loans nondischargeable in bankruptcy in the first instance. I went on here to address the power of student loan debtors to file an action against his or her lender and seek a court order discharging the loan on the ground of undue hardship.
Then late this past month I blogged here about the usefulness (or lack thereof) of empirical research in formulating legislative policy. Well now there's a piece of empirical research that should encourage student loan debtors to seek such a hardship discharge. You can listen to an American Bankruptcy Institute podcast here in which ABI resident scholar Susan Hauser discusses the findings of Ph.D. candidate Jason Iuliano in his recently published work An Empirical Assessment of Student Loan Discharges and the Undue Hardship Standard.
In brief, 40% of those who seek a undue hardship discharge of their student loans succeed, at least to some extent. That's a far greater percentage of success than almost anyone, including me, imagined was the case. Iuliano identifies three factors that correlate to success: the existence of a medical hardship, current unemployment, and low income. None of these are surprising but what was the most shocking of Iuliano's findings was that pro se debtors have a higher rate of discharge success than debtors who are represented by an attorney. You'll need to listen to the podcast to hear his thoughts on why that might be the case.
I've also observed that § 523(a)(8) of the U.S. Bankruptcy Code makes student loans nondischargeable in bankruptcy in the first instance. I went on here to address the power of student loan debtors to file an action against his or her lender and seek a court order discharging the loan on the ground of undue hardship.
Then late this past month I blogged here about the usefulness (or lack thereof) of empirical research in formulating legislative policy. Well now there's a piece of empirical research that should encourage student loan debtors to seek such a hardship discharge. You can listen to an American Bankruptcy Institute podcast here in which ABI resident scholar Susan Hauser discusses the findings of Ph.D. candidate Jason Iuliano in his recently published work An Empirical Assessment of Student Loan Discharges and the Undue Hardship Standard.
In brief, 40% of those who seek a undue hardship discharge of their student loans succeed, at least to some extent. That's a far greater percentage of success than almost anyone, including me, imagined was the case. Iuliano identifies three factors that correlate to success: the existence of a medical hardship, current unemployment, and low income. None of these are surprising but what was the most shocking of Iuliano's findings was that pro se debtors have a higher rate of discharge success than debtors who are represented by an attorney. You'll need to listen to the podcast to hear his thoughts on why that might be the case.
So, even though I don't expect Congress to do something sensible like to reduce student loan subsidies or require schools that feed on student loans to demonstrate that they actually educate their customers students, bankruptcy at least offers an uncomfortable way out for many more than currently use it.
I wonder what the rate of hardship discharges are for unemployed debtors who ARE attorneys.
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