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The Bankruptcy StrategistFeaturesBankruptcyEducation LawLitigationRegulation

Sympathy for the Debtor? Not When It Comes to Student Loans

By Rudolph J. Di Massa Jr. and Jarret P. Hitchings

Student loans are in the news. Nearly everyone either has, or knows someone with, a student loan obligation, and growing numbers of borrowers are in some form of default or forbearance. Student loan forgiveness has even become an election issue. Discussions of student debt often include the blanket assumption that not even bankruptcy can relieve a borrower of his student loan obligations. While this assumption is incorrect, a debtor must provide compelling evidence that an undue hardship will result if the debtor is required to repay the loan, see, 11 U.S.C. Section 523(a)(8).

The Bankruptcy Code does not define "undue hardship." However, in Brunner v. New York State Higher Education Services, 831 F.2d 395 (2d Cir. 1987), the U.S. Court of Appeals for the Second Circuit adopted a three-prong test for evaluating "undue hardship" claims. According to the Brunner test, in order to justify the discharge of student loan debt, a debtor must prove: an inability to maintain a minimal standard of living; the inability is likely to persist for a significant portion of the loan repayment period; and a good faith effort to repay the loan. The Brunner test has been strictly applied in a majority of circuits and has resulted in an exceptionally demanding standard that, in most circumstances, prevents discharge of a student loan obligation in bankruptcy without the consent of the student loan lender.

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