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Token Payments That Increase Student Loan Debt Make No F’ing Sense

“If the law supposes that,” said Mr. Bumble, squeezing his hat emphatically in both hands, “the law is a ass – a idiot”. – Charles Dickens, Oliver Twist

About a year ago, I blogged on the bankruptcy case of Tamara Parvizi, a 51-year-old unlicensed medical doctor who sought to discharge $650,000 in student debt –most of it accumulated from going to medical school.

Actually, Ms. Parvizi attended two medical schools. First, she went to med school at the University of Rochester but dropped out. Later she enrolled at St. George’s University School of Medicine, a for-profit medical school on the Caribbean island of Grenada.

Parvizi wasn’t represented by a lawyer when she went to the bankruptcy court. As an appellate court observed in a footnote, she didn’t even file a proper complaint. She simply submitted a two-page letter asking to have her student loans forgiven.

Judge Elizabeth Katz, a Massachusetts bankruptcy judge, denied Parvizi’s plea for relief, ruling partly that Parvizi had not made sufficient attempts to maximize her income.

Parvizi appealed, and a Bankruptcy Appellate Court affirmed Judge Katz’s decision. The BAP court agreed with Judge Katz that Parvizi had failed to maximize her income, although it admitted that she would be unable to pay back such a mountainous debt even if she tried her best to get a better-paying job.

Judge Katz and the BAP court both said Parvizi should sign up for a REPAY income-based repayment plan. Based on her low income, her monthly payments would only be $80 a month. Her student debt will be forgiven if she makes regular payments for 25 years.

Of course, as the BAP court acknowledged, Ms. Parvizi’s debt is negatively amortizing. In other words, her debt grows monthly because her $80 payments aren’t large enough to cover accruing interest.

Indeed, Ms. Parvizi’s debt has probably grown by $50,000 since the date of Judge Katz’s 2021 decision. That’s right–she must now owe around $700,000.

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Does any of this make sense to you? It makes no sense to me. Why force a woman in her fifties to make token payments on a debt that will grow to well over a million dollars by the time she finishes her REPAYE plan?

Who benefits from this nonsense? Two medical schools benefited, and one of those schools is a for-profit shop located outside the United States.

And, of course, the four federal judges who reviewed Ms. Parvizi’s debt are doing okay. They all make nice salaries and will get fat federal pensions.

The outcome of this litigation is insane. Perhaps Charles Dickens was right when he observed in one of his novels that “the law is an ass.”

Richard Fossey is a professor at the University of Louisiana in Lafayette, Louisiana. He received his law degree from the University of Texas and his doctorate from Harvard Graduate School of Education. He is editor of Catholic Southwest, A Journal of History and Culture.

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