Walter Lee Little and Linda Leticia Little, a married couple, are 58 years old. About thirteen years ago, they both took out student loans to take courses at various community colleges; but they never obtained degrees. They filed for bankruptcy in 2017 and applied to have their student-loan debt forgiven.
Like many student-loan debtors, they dived into the world of bankruptcy law without an attorney. The U.S. Department of Education was represented by a lawyer from the U.S. Attorney’s Office.
The Littles filed an adversary action to obtain student-loan debt relief, but their case never went to trial. In June 2019, the Department of Education (DOE) filed a motion for summary judgment against the Littles, and Bankruptcy Judge Robert L. Jones granted DOE’s motion in October.
In ruling against the Littles, Judge Jones applied the three-part Brunner test to determine whether the Littles met the Bankruptcy Code’s “undue hardship” standard. Regarding part one, Judge Jones said there was a factual dispute regarding whether the Littles could maintain a minimal standard of living if they were forced to repay their student loans.
Regarding Brunner’s other two tests, Judge Jones flatly ruled against the Littles. The Judge ruled that the Littles could not show that “additional circumstances” would persist for “a significant portion of the repayment period of the loans . . .” (p. 859, quoting Brunner). Remarkably, Judge Jones said the Littles must show “a certainty of hopelessness” about their financial future, a standard that some other courts have rejected.
The Littles argued that they were in their late 50s and nearing retirement. And they also pointed out that Mr. Little suffered from a variety of medical conditions and was disabled.
Judge Jones was entirely unsympathetic. “Mr. Little says that he suffers from a variety of medical conditions,” the Judge observed, but those conditions “do not prevent Mr. Little from collecting disability payments or pension payments” (p. 860).
Regarding Mrs. Little’s age and health prospects, Judge Jones said that “Mrs. Little was older when she went back to school and knew she would have to make payments in her later years” (p. 862).
In sum, Judge Jones ruled, “The Littles chose to go to school later in life; the repayment of debts will thus last into their later years. Age… does not prevent the Littles from collecting pension payments; instead, their monthly income should increase upon turning 65” (p. 861).
As to Brunner’s good faith test, Judge Jones ruled against the Littles as well. The Judge emphasized that the Littles had not made a single payment on their student loans
My sympathies are with the Littles. Judge Jones’ decision partly rested on the fact that the Littles will receive pensions when they turn 65 based on their employment with ATT. But those pensions are quite small. Mr. Little will receive about $850 a month and Mrs. Little anticipates getting $700 a month. Judge Jones also noted that Mr. Little is entitled to receive a $900 disability check.
But these three sources of income together only amount to a gross income of $2450 per month–barely enough to live on. It is completely unreasonable to expect the Littles to make student-loan payments during their retirement years to pay for educational experiences that apparently did not benefit them financially.
Would the Littles have a better case had they made some student-loan payments? Perhaps. But the Littlesstruggled financially for a variety of reasons that were beyond their control. They submitted documentation that they had been on food stamps for a time and had significant medical expenses (p. 857).
Judge Jones fortified his decision with citations to many legal opinions, but his opinion failed to note how much the Littles had borrowed to attend college or the interest rate on their loans. Nor was it clear from Judge Jones’ opinion how long the Littles’ loans were in forbearance or deferment, periods when they had no legal obligation to make student-loan payments.
In my opinion, the Department of Education considers Mr. and Mrs. Little to be collateral damage from an out-of-control student loan program that shovels federal money to colleges and universities without regard to the quality of their programs.
Judge Jones’ Little decision shows that it is risky for middle-aged people to take out student loans to attend college. Moreover, although Judge Jones may not realize it, his decision in Little v. U.S. Department of Education undermined the ability of Mr. and Mrs. Little to live securely and with dignity when they reach their retirement years.
Little v. U.S. Department of Education, 607 B.R. 853 (Bankr. N.D. Tex. 2019).