You load sixteen tons, what do you get?
Another day older and deeper in debt
Saint Peter don't you call me 'cause I can't go
I owe my soul to the company store
Tennessee Ernie Ford
Unfortunately, she was unable to make payments from time to time, and her debt grew due to accrued interest and penalties. When she filed for bankruptcy in 2014, Butler's debt had grown to almost $33,000, more than twice what she borrowed!
Did Butler get rich in the 21 years that passed since she graduated from college? No, she didn't. When she filed for bankruptcy she owned no real property and drove a 2001 Saturn that had logged 147,000 miles. According to the bankruptcy court, Butler never made more than about $35,000 a year, and her monthly income at the time of her bankruptcy filing was only $1,879, about $300 less than her expenses.
In spite of her bleak financial situation and an employment history of relatively low wages, a bankruptcy judge refused to discharge Ms. Butler's student loans. In fact, in applying the three-prong Brunner test, the court ruled that she failed to meet two of the prongs.
First, the court concluded that Butler was able to maintain a minimum standard of living, in spite of the fact that she was living on unemployment benefits at the time of her hearing and these benefits were about to run out. Indeed, the court admitted that Butler "had virtually no resources to support herself."
Nevertheless, in the court's view, Butler would likely find employment soon, which would enable her to maintain a minimum standard of living and make payments under an income-base repayment plan. Thus, Butler failed the first prong of the Brunner test.
Brunner's second prong required Butler to show that additional circumstances existed that prevented her from paying on her student loans in the future. Here again, the judge ruled against her. The judge found Butler to be "capable and intelligent with no health problems or other impediments to being gainfully employed." The court acknowledged that Butler had "an unfortunate employment history through no apparent fault of her own," but she could show no exceptional circumstances that would indicate that she could not pay back her student loans in the coming years.
Interestingly, the judge ruled in Butler's favor regarding one prong of the Brunner test. In the judge's view, Butler had met her burden of showing she had made good faith efforts to pay back her loans. As the judge acknowledged, Butler had made payments totally more than the original principal on her loans, and she had made diligent efforts to improve her financial status. "This is not a case of a recent graduate trying to escape student loan debts before beginning a lucrative career," the judge admitted. On the contrary, Butler had made "substantial, though futile, efforts to pay down her student loan debt."
So why did Butler lose her case? This is the bankruptcy judge's summary:
[Butler's] financial situation is unfortunate, but more than that is required for a finding of undue hardship under the demanding Brunner test. [Butler] has shown good faith in her efforts to remain employed and pay down her student loan debt. But as a healthy, intelligent, relatively young worker with a proven ability to secure productive employment, [she] is unable to prove that her student loan obligations prevent her from maintaining a minimum standard of living, now or in the foreseeable future. Thus. . ., [Butler's] student loan debt will not be discharged.The Butler decision is particularly unfortunate because her situation is not untypical. Like a lot of people, she obtained a liberal arts degree from a private college that never led to a well-paying job. In spite of good faith efforts to pay back her loans, she was dragged down by exorbitant penalties and accruing interest, like thousands of other Americans.
And here is the final outcome. Brenda Butler will continue in a long-term income-based repayment plan that will not conclude until 2037--42 years after she graduated from college!
Surely this is not what Brenda Butler envisioned when she enrolled at Chapman University in 1991 with bright hopes for a future as a writer. And surely this is not what Congress envisioned when it passed the Higher Education Act more than 50 years ago.
And that is why Brenda Butler would make a good poster child for the student-loan crisis. A good person, who went to college in good faith and made good faith efforts to pay back her student loans, will be burdened with student-loan debt--mostly penalties and interest--until she reaches retirement age.
Butler v. Educational Credit Management Corporation, No. 14-71585, Adv. No. 14-07069 (Bankr. C.D. Ill. Jan. 27, 2016).