Inappropriate standards for paying off student loans in bankruptcy mean the school won’t go away forever for many debtors

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Dealing a blow to proponents of bankruptcy student loan repayments, the US Supreme Court recently denied a conviction. McCoy v. The United States… As the federal student loan grace period expires at the end of September, many hoped that the high court would provide, if not clarity, then at least uniformity for the millions of Americans currently on the hook for student loans.

The case focuses on a decision by the US Court of Appeals for the Fifth Circuit in which a Texas woman was denied payment of her student loan. The legal rule in question is the same for all bankrupt student loan borrowers: Does the refusal to pay “undue hardship” for the debtors under 11 USC 523 (a) (8). The meaning and determination of who meets this standard varies from court to court and is subject to constraints that critics describe as harsh on borrowers and beyond the intentions of Congress. McCoy’s case, for example, concerned whether she had a “complete inability” to repay loans. This high bar is not suitable for all However, student loan debtors.

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