Wiping out student loan debt before it wipes you out

Erasing student loans requires proof that paying the debt would cause “undue hardship,” and some judges think the rigid standard should be reconsidered.

Source, New York Times: Judges Rebuke Limits on Wiping Out Student Loan Debt

A powerful story.

I’ve only been vaguely aware of student loan debts and only until my nieces both had to take out loans for graduate school. The amounts are jaw-dropping to me.

I gazed mentally into the future of anyone with a big student loan and wondered how young people are supposed to get an education and go on with anything like a reasonable life, given the endless payments they must make.

It seems many do not have lives, as this story makes clear. More remarkable is that the woman upon whom the story focuses had to do all the legal work herself, presumably because she couldn’t afford a lawyer.

On a typical day in her last job, Janet Roth left home at 4 a.m. each day and drove 40 miles to a tax preparation office in Glendale, Ariz. When she finally got back home, she had less than an hour before starting her 6 p.m. shift decorating cakes at Walmart. She worked until midnight, giving her just a few hours to sleep before starting all over again.

Ms. Roth, 68, worked in many jobs over the years, but she never made quite enough to pay back the $33,000 she borrowed years earlier for an education degree she couldn’t afford to complete, and certainly not the $95,000 it ballooned to in default.

She filed for bankruptcy, wiping out five figures in medical debts. But erasing student loans requires initiating a separate legal process, where borrowers must prove that paying the debt would cause an “undue hardship.”

To prepare her case, she copied down statutes at a local law library and watched episodes of “Law and Order.” Her efforts paid off: Ms. Roth’s loans were discharged in 2013.

But she needed, as well, an intelligent and humane judge whose ruling has apparently shaken up the entire student loan matter:

That Ms. Roth, now living on Social Security, managed to succeed in what is known as a notoriously difficult process is not even the most remarkable aspect of her case. Instead, the ruling captured the attention of other judges and legal scholars because of a judge’s bluntly worded written opinion that rebuked the widely adopted hardship standard used to determine whether a debtor is worthy of a discharge.

The judge, Jim D. Pappas, in his concurring opinion for the bankruptcy appellate panel decision in the United States Court of Appeals for the Ninth Circuit, said the analysis used “to determine the existence of an undue hardship is too narrow, no longer reflects reality and should be revised.”

He added: “It would seem that in this new, different environment, in determining whether repayment of a student loan constitutes an undue hardship, a bankruptcy court should be afforded flexibility to consider all relevant facts about the debtor and the subject loans.” But the current standard, he wrote, “does not allow it.”

So not only did Ms. Roth win her painful case, she has apparently changed the law and has helped everyone else in her position. She deserves applause — and a real life.

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