Student Loan Bankruptcy Discharge Student Loan Related

Department of Education Seeks Input Regarding Student Loan Bankruptcy Discharge

Written by Steve Rhode

It sure feels ironic that the Department of Education is seeking feedback and input regarding their current policy of allowing for the elimination of student loan debt in bankruptcy. It’s not a process they even really adhere to now.

Since their infamous letter laying out how they would approve student loans for bankruptcy, they have fought discharges every step of the way. For example, there is the story of Kristin Price.

The Department of Education is under the misimpression those entities holding federal student loans actually agree to discharges, they regularly fight back.

“Department regulations currently require holders to evaluate each undue hardship claim to determine whether requiring repayment would constitute an undue hardship. If a holder determines that requiring repayment would impose an undue hardship, the holder must concede an undue hardship claim by the borrower in an adversary proceeding.

The Department’s current guidance to guarantors and educational institutions in defending bankruptcy proceedings is summarized in a July 7, 2015, Dear Colleague Letter (GEN-15-13 and provides for a two-step analysis when evaluating whether or not to object to a borrower’s claim of undue hardship. The Department follows the same two-step analysis when defending bankruptcy proceedings for Direct loans. After receiving input from this notice, we will consider whether that analysis is still appropriate.”

News Alert: It’s not appropriate. Far too many debtors are being pushed into income-driven repayment programs at $0 per month only to leave them indebted rather than receive a discharge.

The Department of Education would like to hear from you. Here is the feedback they are requesting:

“The undue hardship standard established under either test requires a variety of factors to be evaluated when determining whether repaying a debt will cause a debtor and his or her dependents an undue hardship, such as, but not limited to, the debtor’s: medical, work, or family history; history of mental illness; level of educational attainment; future employment prospects; payment history, including a borrower’s willingness to avail himself or herself of all available repayment plans, including income-driven repayment plans; and necessary expenses in excess of ordinary unique to the debtor.

READ  The Real Reason Student Loans Should Be Dischargeable in Bankruptcy

The Assistant Secretary for Postsecondary Education invites the public, including individuals, advocacy groups, and professional organizations, as well as other State or Federal agencies or components, to provide comment on, and offer information regarding: (1) factors to be considered in evaluating undue hardship claims; (2) weight to be given to any such factors; (3) whether the use of two tests results in inequities among borrowers; (4) circumstances under which loan holders should concede an undue hardship claim by the borrower; and (5) whether and how the 2015 Dear Colleague Letter should be amended. The Department will review the data collected to determine whether there is any need to modify how undue hardship claims by student loan borrowers in bankruptcy are evaluated.

You may provide comments in any convenient format (i.e., bullet points, charts, graphs, paragraphs, etc.) and may also provide relevant information that is not responsive to a particular question but may nevertheless be helpful.”

To submit comments and feedback go to and search for [Docket ID ED-2017-OPE-0085] Request for Information on Evaluating Undue Hardship Claims in Adversary Actions Seeking Student Loan Discharge in Bankruptcy Proceedings.

Feedback should be allowed for submission after 2-21-2018.

About the author

Steve Rhode

Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.


  • Steve, The recent RFI from DOE asking for input about the congressional mandate to “except” student loans fro bankruptcy discharge except in cases of undue hardship SCARES ME!

    If you read it closely the DOE states it this way:”seeks to ensure (the exception) is ‘appropriately’ implemented’….” and it goes on to add: “is requesting public comment on ‘factors to be considered’ in evaluating undue hardship…. (and whether) “potentially additional considerations should weigh into whether an undue hardship claim should be conceded by the loan holder”.

    One could interpret this to mean that the DOE is regretting publicizing that July 7, 2015 Policy Directive in which the DOE sought to limit the predatory actions of ECMC and other aggressive lenders from running up huge court costs and legal fees to “fight undue hardship” cases being filed by underemployed, disabled, and aged debtors owing student loans with no means to even pay the ever increasing and accruing interest.

    Could it be the DOE wants to revert back to a time when they were in bed with the lenders and their voracious legal teams who drove some debtors to the point of suicide? For any reading this comment you need to make your views known while the DOE window of opportunity for input remains open. You can post your input on what you think needs to be done in regards to the current bankruptcy law – which in nearly every case, denies including student loan debts from being discharged in a chapter 7 or 13 filing.

    Please go here and send the Dept. of Ed. your input and your feelings about this travesty!

    Use the “Comment Here” to write out your comments on this and do it today, the deadline is May 22, 2018 before midnight. Thank you!
    Richard A Precht

    • I stand by my position that given the previous actions by ED in this administration the odds are the review is to make it harder to discharge in bankruptcy, not easier.

  • Steve, what’s your guess as to where this going to go? Are the servicers ever going to be guided NOT fight student loans in bankruptcy?

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