Tuesday, July 30, 2019

The Student Loan Crisis: If you aren't concerned, you're not paying attention

Joseph Kennedy, it is said, got out of the stock market after a shoeshine boy gave him a stock tip. When a shoeshine boy is in the stock market, Kennedy reasoned, it is time to get out. And thus Joe Kennedy, JFK's father and a very wealthy man, got out of the market before the 1929 crash.

Signs are all around us that the federal student-loan program is deep underwater, but the nation's colleges and universities keep chugging along like the federal gravy train will keep spewing money forever.

Already a lot of small, obscure liberal arts colleges are shutting down.  But the public universities and the elite private colleges are as heedless of this trend as a herd of wildebeests who keep galloping along while lions pull down the weaker animals at the back of the herd.

So here are some "shoeshine boy" signs of a looming calamity:

The College Board reported that 29 percent of student debtors were in income-driven repayment plans (IDRs)in 2018 and that the amount these people owed constituted almost half of all the student-loan money in repayment.

Think about that. If half of the outstanding student debt is being serviced by borrowers in income-based plans, that means half of the debt is not being paid back.

Then we have the Government Accountability Office's report that one-third of a sample of people in IDRs say that they have no income but actually have annual incomes of at least $45,000.  These folks are paying zero on their student loans but aren't counted as defaulters.

And then we have Education Secretary Betsy DeVos's candid admission that only one out of four student borrowers is paying down interest and principal on their student loans and that 43 percent of all student loans are "in distress."

Senator Bernie Sanders wants to forgive all student debt, and perhaps that's a good idea. After all, what's $1.6 trillion among friends? But we can't wipe out all that debt without cleaning up the corrupt and mismanaged college industry. Will Bernie shut down the sleazy for-profit colleges? Will he put an end to a tenure system that gives mediocre professors lifetime job security? Will he insist on closing third-tier law schools and redundant regional universities? I seriously doubt it.

If you are a fortunate adult who has no student-loan debt, you can gaze on the coming disaster with benign equanimity. And if you are a university administrator pulling down 200 K a year, what do you care? The bubble probably won't burst until after you're drawing your generous pension.

But for the nation as a whole, the student-loan crisis is a calamity, which has destroyed the integrity of our once fine colleges and universities while plunging millions of saps to the "ragged edge of poverty."

Wildebeests: Don't look back, the lions are gaining on us







Saturday, July 27, 2019

Student Loan Assistance Companies on Notice Now for Inflating Repayment Plans to Get $0 Payments: Essay by Steve Rhode





Written by Steve Rhode (originally published in Get Out of Debt Guy on July 26, 2019)
A long implemented trick by some student loan assistance companies has been to tell consumers they can inflate the number of people they support in order to reduce the monthly payment on Income-Drive Repayment (IDR) Plans.
Consumers have reported and I’ve covered stories where sales representatives of student loan assistance companies, sometimes pretending to be only “document preparation” companies, have said things like:
  • If you give someone a ride to work you can count them as a dependent towards reducing your student loan payments.
  • How many people regularly hang out at your house? You can count them as people you support.
  • Do you have any roommates because you can count them as dependents?
  • How many people do you buy presents for?
A brave inside tipster (send in your tips heretold me, “In order to make the sale, sales agents would falsely increase family sizes on government documents in order to deceptively get clients reduced or free monthly payments on their Federal student loan payments.”
Consumers fell for this false inflation of family size either out of blind faith the company they hired to lower their student loan payments actually knew what they were talking about, or they just wanted a lower payment.
The problem with this strategy is it is based entirely on a mountain of lies on a federal form. And the reality has always existed that either the government was going to ask for documentation before eventually forgiving loans in an IDR plan or monthly payments were going to explode when the actual proof was requested to verify family size.
Now imagine what will happen when the proof is demanded to support the IDR and you can only provide the required proof for three people and you’ve been claiming 15. Now there is a red flag.

The Jig is Up

Just recently the United States Government Accountability Office (GAO) submitted a report titled – “Education Needs to Verify Borrowers’ Information for Income-Driven Repayment Plans.”
Here is what the GAO investigation found:
“GAO identified indicators of potential fraud or error in income and family size information for borrowers with approved Income-Driven Repayment (IDR) plans. IDR plans base monthly payments on a borrower’s income and family size, extend repayment periods from the standard 10 years to up to 25 years, and forgive remaining balances at the end of that period.
• Zero income. About 95,100 IDR plans were held by borrowers who reported zero income yet potentially earned enough wages to make monthly student loan payments. This analysis is based on wage data from the National Directory of New Hires (NDNH), a federal dataset that contains quarterly wage data for newly hired and existing employees. According to GAO’s analysis, 34 percent of these plans were held by borrowers who had estimated annual wages of $45,000 or more, including some with estimated annual wages of $100,000 or more. Borrowers with these 95,100 IDR plans owed nearly $4 billion in outstanding Direct Loans as of September 2017.
• Family size. About 40,900 IDR plans were approved based on family sizes of nine or more, which were atypical for IDR plans. Almost 1,200 of these 40,900 plans were approved based on family sizes of 16 or more, including two plans for different borrowers that were approved using a family size of 93. Borrowers with atypical family sizes of nine or more owed almost $2.1 billion in outstanding Direct Loans as of September 2017.
These results indicate some borrowers may have misrepresented or erroneously reported their income or family size. Because income and family size are used to determine IDR monthly payments, fraud or errors in this information can result in the Department of Education (Education) losing thousands of dollars of loan repayments per borrower each year and potentially increasing the ultimate cost of loan forgiveness. Where appropriate, GAO is referring these results to Education for further investigation.”
And as hard as Education has pushed back on forgiving loans under the Public Service Loan Forgiveness program, I can only imagine what will happen when these fraudulent IDR plans come up for forgiveness and are denied.
The consumers will be on the hook for the fraud and the student loan assistance and document preparation companies will be long gone.

Fraud in the Federal Student Loan Program? We're shocked! Shocked!

Everyone knows the federal student-loan program is a train wreck. Even Education Secretary Betsy DeVos described it as a looming thunderstorm and admitted that 43 percent of all student loans are "in distress."

Now the Government Accountability Office has issued a report indicating there may be fraud in the income-driven repayment programs. (IDRs)  This is what GAO reported based on an analysis of a sample of IDR plans:

  • About 95,000 people who are enrolled in a sample of IDRs report they have zero income, which means they are excused from making any payments on their student loans. A GAO analysis found that 34 percent of these people had estimated annual wages of $45,000 or more (p. 12).
  • Monthly payments for people in IDRs are partly determined by family size, with payments adjusted downward for borrowers who have dependents. GAO identified 40,00 IDR plans held by borrowers who claimed to have nine people or more in their families (p. 17). More than a thousand IDR participants claimed to have a family size of 16 people or more!
GAO's report undoubtedly understates the extent of the problem. According to GAO, there are 1.1 million people in IDRs who report having zero annual incomes (p. 36, footnote 8), and GAO did not look at all those individuals. If GAO's findings for a sample of IDRs is representative of all the borrowers who claim to have no income, then about 375,000 people who claim to have zero income are lying.

The GAO report is disturbing because more and more student borrowers are entering income-driven repayment plans. According to the College Board, 29 percent of all student debtors in repayment were in IDRs in 2018 and their debt constituted almost half of all the money in repayment.

Even if all the people in IDRs are honestly reporting their income--and GAO found thousands of liars-- almost everyone in an IDR is making income-based payments that are so low that they are not paying down the loan principal.

In short, the Department of Education's income-driven repayment plans are hemorrhaging red ink, but it is unclear just how many billions of dollars are being lost. No wonder Betsy DeVos commissioned a private accounting firm to audit the student-loan program. Apparently, she wants to know the true scope of this disaster.


Fraud in the student loan program? We're shocked! Shocked!





Sunday, July 21, 2019

Student charged $3,800 for failing to return rented textbook on time

Like blind hogs rooting for acorns, America's universities and their associated vendors constantly seek ways to snuffle out cash from hapless college students. Here's a fine example of what I'm talking about.

Amazon charged Amelia San Filippo, a sophomore at the University of Delaware, a $3,800 fee for failing to return a rented textbook on time. Apparently, San Filippo missed the fine print in her rental agreement. If she didn't return the book by June 4 she would be charged to purchase the book.

What is the title of this valuable tome? Cultural Anthropology: A Toolkit for a Global Age, which can be bought online for $150!

Amelia returned the book and her father got the charge reversed after a nine-hour phone call to Amazon's customer service.  Amazon issued a statement to a local television news program saying:
This was an isolated error that we quickly resolved directly with the customer and have issued a refund. We've apologized to the customer and are taking additional actions to ensure this situation does not happen again.
In my mind, this message is corporatespeak for "Oops! We got caught."

This kind of nonsense happens all the time in our brave new world where universities and their corporate outsourcers treat college students like cash cows.

I myself had a similar encounter with Louisiana State University a few years ago. My wife and I arrived to do volunteer work at the Catholic student center located on the LSU campus. We came in separate cars and parked in a lot marked "Church Parking." There was a gate to the parking lot, but the gate was open.

At the end of our volunteer activity, we found parking tickets on our cars informing us that we were each being charged $330 for unauthorized parking: $660 in total. Must be some mistake.

I walked to the LSU Visitor Center, where a parking employee immediately knocked off two $300 fees. But she would not clear two fees for $30. To no avail, I explained that we were on church business and that we parked in a lot designated for church parking. If I wanted to challenge the tickets, I was told, I could file an administrative appeal.

For about a year, LSU sent my wife and I separate monthly bills of $30. Then we got letters saying the matter was being turned over to the District Attorney for collection. At that point, I wrote checks totally $60.

My wife is an LSU graduate and we once made a small donation to the LSU Foundation. I occasionally get a cheery message asking me to donate money to the university.

I don't respond to these messages, but if I did I would say: No thank you!

Like blind hogs rooting for acorns



Friday, July 19, 2019

Let the Good Times Roll! Murder, Corruption, Abuse, and Negligent Homicide in South Louisiana

I was obsessed by Hurricane Barry, which, the media assured us, was going to overtop the levees and destroy New Orleans. Mesmerized, I watched the Weather Channel so much last week that I feel like I  should get an online degree in meteorology.

But Barry punked out on us with minimal damage so I turned my attention to reading the local news. So what's going on in South Louisiana?

Matthew Naquin, a former LSU student and fraternity member, was convicted of negligent homicide in the death of Max Gruver, an LSU freshman from Georgia. Gruver's Phi Delta Theta fraternity brothers forced Gruver to chug hard liquor in a hazing exercise the frat boys euphemistically called "Bible study." Gruver died of alcohol poisoning, so full of booze that a testifying toxicologist said he was "a dead man walking." At the time of his death, his blood alcohol count was six times the legal limit for driving.

In other news, Ronn Jermaine Bell was arrested for the murder of Sadie Roberts-Joseph, a local civil rights activist who was found suffocated in the trunk of her car. In addition to her civil rights work, Roberts-Joseph was a landlord, and Bell was two months behind on his rent. Was Roberts-Joseph killed over a rent dispute? A motive has yet to been determined.

Also in the news, police charged Salvatore Euggino with negligent homicide in a hit-and-run accident near St. Francisville. Police say Euggino killed a 50-year-old pedestrian with his car. This incident occurred on Monday, just one day after Euggino was charged with reckless driving in another incident. According to the Baton Rouge Advocate, Euggino also faces negligent homicide charges relating to a head-on car accident last March that killed a 34-year-old woman.

Also this week, Sarah James, a 19-year-old LSU sophomore, was struck and killed by a car on Nicholson Road near the LSU campus.  Ms. James had a life full of promise ahead of her and wanted to be a doctor. The newspaper story didn't identify the car's driver.

Over in New Orleans, four police officers were fired for engaging in an unauthorized high-speed pursuit of some joyriders in a stolen car. Two teenage kids were killed when their car rammed into a hair salon. The hair salon caught fire and a woman inside was also killed.

And then today's Advocate reported that Moses Evans, a justice of the peace and former police officer, was arrested on a "litany of domestic abuse counts." According to the newspaper report, Evans is "accused of  brutally abusing his now ex-girlfriend and her three children over more than a decade, causing them severe injuries and permanent disfigurement."

Finally, Ray Nagin, New Orleans' telegenic mayor during Hurricane Katrina, lost the appeal of his conviction on charges of bribery and money laundering, rendered 5 years ago. The news story said Nagin wrote his appeal brief himself while serving time in a federal prison camp in Texas.

Much of the mayhem that occurs in South Louisiana takes place at the margins of society, and middle-class Louisianians don't think much about the murder, abuse, and corruption that the local newspaper reports on a daily basis. Laissez les bons temps rouler, we like to say. Let the good times roll!

But maybe Louisianans could do more as individuals to nurture a saner and healthier culture. Perhaps we could slow down a little bit, drive a little slower, drink a little less, try to be a little more civic-minded, and let the good times roll at a more moderate pace. Or maybe, to borrow a phrase from the immortal Merle Haggard, we'll keep our eyes closed to the pathological currents in our communities and continue to allow them to roll downhill like a snowball headed for hell.




"Are we rolling downhill like a snowball headed for hell?"









Tuesday, July 16, 2019

Weingarten v. DeVos: American Federation of Teachers accuses the Department of Education of mismanaging the Public Service Loan Forgiveness program

Last week, Randi Weingarten and the American Federation of Teachers (AFT) sued Education Secretary Betsy DeVos and the U.S. Department of Education, accusing DOE of mismanaging the Public Service Loan Forgiveness program (PSLF). AFT sued on behalf of itself and eight educators whose applications for public-service loan forgiveness were denied. 

Weingarten is president of AFT and she sued the Department of Education in her official capacity as an AFT officer. In a call to reporters, Weingarten was highly critical of DOE's handling of the PSLF program. “This program was not supposed to be negotiable or debatable," Weingarten told reporters.  "It is a right under [the] law. It shouldn’t be a crapshoot, but under Betsy DeVos, that is exactly what it’s become." 

PSLF was enacted by Congress in 2007 to aid student-loan borrowers who desired to enter public service occupations but were deterred by their burdensome student loans. Under the program, student-loan borrowers in qualified public-service jobs who make 120 monthly payments in approved federal loan programs are entitled to have their remaining student-loan debt forgiven. 

The first PSLF participants became eligible for student-loan forgiveness in the fall of 2017, after having made 120 student-loan payments over the previous ten years. When they applied for loan forgiveness, however, DOE denied 99 percent of the applications. Most PSLF loan-forgiveness applications were denied on the grounds that the applicants were not eligible to participate even though their loan servicers had assured them they were eligible.

Why is AFT interested in the way DOE is managing the PSLF program? 

AFT represents 1.7 million teachers and public-service professionals, and many AFT members are hoping to obtain student-loan relief under PSLF. In a survey of its members, AFT learned that 82% of AFT members who had submitted PSLF applications were denied. Many applicants were denied for failing to meet eligibility requirements due to misinformation provided by their loan servicer

According to AFT's lawsuit, DOE disregarded repeated misrepresentations by its student-loan servicers that student-loan borrowers were qualified for PSLF loan forgiveness. 
Those servicers misinformed [AFT members] that they were “on track” for PSLF and making “qualifying” payments for PSLF, even though they did not actually have qualifying loans or were not in qualifying repayment plans. Only years later, after they had made 120 payments and applied for forgiveness, did these public servants learn for the first time that their payments did not count. Had the loan servicers given these Plaintiffs the correct information, they easily could have consolidated their loans, entered qualifying repayment plans, and been eligible for forgiveness under PSLF. 

AFT is suing under two primary legal theories. First, AFT argues that DOE violated the Administrative Procedure Act in the way it handled PSLF loan-forgiveness applications. Second, AFT accuses DOE of violating due process under the Fifth Amendment to the U.S. Constitution. 

In some ways, AFT's lawsuit is similar to the one filed by the American Bar Association (ABA) against the Department of Education in 2016. The ABA accused DOE of wrongly denying ABA the right to participate in the PSLF program. It also sued on behalf of four public-service lawyers whose applications for PSLF loan forgiveness were denied.

Judge Timothy Kelly ruled on the ABA lawsuit last February and the ABA won a partial victory. Judge Kelly ruled that the ABA had no legal right to be recognized as a qualified participant in the PSLF program. On the other hand, Judge Kelly ruled that DOE violated the Administrative Procedure Act when it denied PSLF loan-forgiveness applications by three of the lawyer-plaintiffs in the ABA's lawsuit. In Judge Kelly's view, DOE had acted arbitrarily and capriciously in handling the lawyers' PSLF applications. Judge Kelly ordered DOE to reconsider the lawyer's PSLF applications in accordance with his opinion. 

Judge Kelly elected to rule in the ABA lawyers' favor based solely on Administrative Procedure Act violations and did not consider the ABA's due process claims.  Now AFT is raising a constitutional due process claim in its own case. 

Why are these developments important to the 45 million people who have outstanding student loans? 

PSLF  an important avenue of relief for people who are heavily burdened by student loans and can't pay them back. If these individuals work in approved public-service jobs for ten years and make 120 payments on their student loans, they are entitled to have their remaining loan balances forgiven. 

Thus, the Trump administration's decision to deny PSLF eligibility to 99 percent of applicants is alarming. If AFT prevails in its lawsuit, that victory could pave the way for PSLF relief for millions of other Americans working in public-service jobs.


*****


Note: The individual plaintiffs in AFT's lawsuit are: Cynthia Miller, Crystal Adams, Connie Wakefield, Deborah Baker, Janelle Menzel, Kelly Finlaw, Gloria Nolan, and Michael Giambona.




Saturday, July 6, 2019

Louisiana professor sentenced to 90 years in prison for misusing his university credit card: The shocking case of State v. Dufus Dorkmeister

Dr.  Dufus Dorkmeister, a folklore professor at the University of Louisiana at Lafayette, was sentenced to 90 years in prison last Friday for abusing his university credit card. Judge Shelly Dick sentenced Dorkmeister to 30 years in prison on each of three counts of fraud, with the sentences to be served consecutively. 

"This is one of the most serious cases of fraud and embezzlement I have ever seen," Judge Dick lectured  Dorkmeister before pronouncing sentence. "Therefore, in essence, I am sentencing you to life in prison. You will not be eligible for parole until you are 137 years old."

Dorkmeister was accused of three separate acts of fraud.  First, while traveling to an academic conference on 19th-century Prussian folklife, he used his university credit card to buy an unauthorized donut in the New Orleans airport. According to the district attorney, the donut cost $1.82 (including sales tax).

 Dorkmeister testified it was a simple mistake. "My university card," he told the jury, " looks almost exactly like my personal credit care.  I just got the cards mixed up and  gave the cashier the wrong card."

Second, the District Attorney accused Dorkmeister of fraudulently seeking reimbursement for his parking fee at the New Orleans Airport.  State Policy requires all state employees to provide parking attendants with a signed form verifying they are on state business and should not be charged sales tax for parking fees.  Dorkmeister's fee was $7.70 cents, which included a 70 cent sales tax.

Again, Dorkmeister argued he was innocent. "I tried to give my official form to the parking attendant,' Dorkmeister testified tearfully, "but she laughed in my face and refused to deduct the 70 cents."

The third criminal charge, which the District Attorney described as the most serious offense, involved a purchase of 25 official University of Louisiana ballpoint pins without verifying that the pens were manufactured by a  vendor licensed to reproduce the University's logo. State policy requires professors to submit purchase requests for souvenir items to the Office of Communication and Technology, along with a photo of the vender's trademark license.

Dorkmeister testified at length on this matter. "I bought the ballpoint pens for my freshman students as little prizes for their academic work," Dorkmeister explained. "I did not know I had to get special permission from the Office of Communications and Technology to buy souvenirs bearing the University logo. I assumed the pens were legitimate because I bought them at the student union."

The District Attorney put Dorkmeister under savage cross-examination, forcing the professor to admit that ignorance of the law is no excuse. After deliberating for six minutes, the jury found Dorkmeister guilty on all three counts and recommended the maximum sentence.

After sentencing, Judge Dick denied bail while Dorkmeister appeals. The judge declared him a flight risk and remanded him for immediate delivery to Angola prison, where he will join 16 other professors. All 16 are housed in a maximum-security cell block reserved for rapists, child molesters, and credit-card abusers.

*****
This essay is a satire and Professor Dorkmeister is a fictional character. The policies lampooned in this satire are actual university policies.


College professors convicted of credit card abuse.

Tuesday, July 2, 2019

In re Engen: Nondischargable student loans create a "prison of emotional confinement"

Bankruptcy Judge Robert Berger issued an opinion in 2016 that deserves to be better known than it is. Although the substance of Judge Berger's decision focused on an arcane provision of bankruptcy law, it also contains a trenchant summary of the misery that has been inflicted on millions of Americans by the federal student loan program.

In re Engen concerns Mark and Maureen Engen, a married couple who filed for bankruptcy under Chapter 13. Mr. and Mrs. Engen submitted a plan to pay creditors about $5,000 a month over five years. Under their plan, the Engens would completely pay off the first mortgage on their home, a car loan, and state and federal taxes. In addition, the Engens would make payments to nonsecured debtors who would only receive partial repayment.

In their plan, the Engens categorized their student-loan debt as a separate class of unsecured creditors and proposed to pay off this debt completely (without interest) before making payments on other unsecured claims (p. 529). The trustee in the Engens' case objected to giving student loans preferential treatment.

In a well-reasoned opinion, Judge Berger approved the Engens' repayment plan over the trustee's objection and explained why it was appropriate to categorize student loans as a separate class of unsecured debt.

First of all, Judge Berger explained, student-loan debt is a particularly onerous debt because it is quite difficult to discharge in bankruptcy.  Bankrupt debtors must file an adversary proceeding to discharge their student loans, and "[t]his bankruptcy litigation is sufficiently expensive and . . . so demanding, that debtors rarely even try to have student loan debt discharged" (p. 531, internal punctuation and citation omitted).

Indeed, a debtor's attempt to discharge student-loan debt is generally "an exercise in futility," with debtors forced to overcome what amounts to an "assumption of criminality" in order to obtain relief (p. 57, internal citation omitted).

In Judge Berger's opinion, the hardships associated with student-loan debt justify treating it as a separate classification in a Chapter 13 repayment plan. In fact, in some instances, lumping student loans with other unsecured debt would cause debtors to owe more on their student loans after bankruptcy than before they filed for bankruptcy relief.

Judge Berger then turned to an extended discussion of the pernicious quality of student-loan debt in the United States. Student loans, he observed, have caused many college graduates to delay marriage, defer car purchases, postpone home ownership, and put off saving for retirement.  Student debt is becoming a growing concern for older Americans, with more than a quarter of student loans held by debtors age 65-74 in default.

Judge Berger went on to articulate the grave harm suffered by distressed student-loan debtors who are unable to discharge their loans in bankruptcy. "Nondischargeable student loans may create a virtual debtors' prison," he wrote, "one without physical containment but assuredly a prison of emotional confinement" (p. 550).

Finally, Judge Berger ended his opinion with the forceful argument that bankruptcy relief benefits not just the distressed debtor; it also benefits society.
It is this Court's opinion that many consumer bankruptcies are filed by desperate individuals who are financially, emotionally, and physically exhausted. Sometimes lost in the discussion that the bankruptcy discharge provides a fresh start to honest but unfortunate debtors is that, perhaps as importantly, it provides a commensurate benefit to society and the economy. People are freed from emotional and financial burdens to become more energetic, healthy participants. (p. 550)
The Student Borrower Bankruptcy Relief Act of 2019 is now pending in Congress. This legislation, if adopted, will remove the "undue hardship" provision from the Bankruptcy Code and allow overburdened debtors to discharge their student loans in bankruptcy like any other nonsecured consumer debt. Supporters of this bill should cite Judge Berger's opinion in In re Engen, because it expresses one federal judge's view that the "undue hardship" provision in the Bankruptcy Code has created "a prison of emotional confinement" that burdens not only student debtors but our society as a whole.

"A prison of emotional confinement"


References

In re Engen, 561 B.R.523 (Bankr. D. Kan. 2016).

Monday, July 1, 2019

Hill v. ECMC: An Army veteran with PTSD sheds her student loans in bankruptcy

Hill v. ECMC: A veteran seeks to discharge her student loans in bankruptcy

Risa Rozella Hill enrolled at Wichita State University after getting out of the Army, and she obtained a bachelor's degree in social work in 2002. She went on to pursue a master's degree from Newman College but did not graduate. In 2008, she received an MBA from DeVry University.

Hill financed her studies with 23 student loans totally $127,000. She never paid anything on these loans, but she was never in default because she obtained various deferments or forbearances that entitled her to skip her loan payments.

In 2013, Hill began to experience symptoms of psychosis, including delusions, hallucinations, and voices that "instructed her to behave in certain ways." In 2014, she was involuntarily committed to psychiatric care in a Georgia hospital. She was diagnosed with bipolar disorder and post-traumatic stress disorder (PTSD).

Hill was released from the hospital, but she was readmitted to another hospital a few months later after showing signs of psychosis. She was released again in November 2014.

Prior to filing for bankruptcy, Hill experienced periods of homelessness. The Social Security Administration deemed her disabled and she began receiving disability-benefit checks--her sole source of income. She also began living in publicly subsidized housing.

In 2017, Hill filed for bankruptcy and sought to have her student loans discharged. Hill was represented by the Atlanta Legal Aid Society. Educational Credit Management entered the litigation as the sole defendant.

Judge Sage Sigler discharges Hill's student loans over ECMC's objections

In evaluating Hill's claim, Judge Sage Sigler applied the three-pronged Brunner test to determine whether repaying the loans would constitute an "undue hardship" under 11 U.S.C. § 523 of the Bankruptcy Code. In Judge Sigler's opinion, Hill's disability income was hardly adequate to meet her basic needs.  Hill could not maintain a minimal lifestyle if she were forced to pay back her student loans, Judge Sigler concluded; and thus, Hill satisfied the first prong of the Brunner test.

Moreover, Judge Sigler continued, Hill's financial circumstances were unlikely to improve during the loan repayment period. "[T]he weight of the evidence demonstrates that [Hill's] condition will persist indefinitely," Judge Sigler observed; and any recovery from Hill's bipolar disorder was "purely speculative." Indeed, Judge Sigler wrote, "The prospect of [Hill] obtaining and maintaining employment commensurate with her prior jobs is unfortunately hopeless." In short, Hill met part two of the Brunner test.

Part Three of the Brunner test required Hill to show that she had handled her student loans in good faith.  Again, Judge Sigler ruled in Hill's favor. Hill met the good faith standard in spite of the fact she had not made a single loan payment.

Judge Sigler pointed out that Hill took the steps necessary to obtain deferments or forbearances, which the judge evidently viewed as a sign of good faith. Moreover, the judge noted, "Good faith effort only requires the debtor to have made payments when she was in a position to make such payments. [Hill] was never in such a position."

Implications

In some ways, the Hill decision is unremarkable. Hill's mental illness (psychosis and PTSD) clearly qualified her for a student-loan discharge. What is remarkable is the fact that ECMC opposed it. ECMC dragged out its shopworn tactic of demanding that Hill sign up for REPAYE, a long-term income-based repayment plan--a plan that would have required her to make monthly payments of zero dollars due to her low income.

But Judge Sigler did not buy that line. ECMC's calculation of Hill's loan payments under REPAYE demonstrated that Hill had no discretionary income to dedicate to student-loan repayment. "The very reason [Hill's] payment amount would be zero-dollars a month under REPAYE is because she cannot afford to make payments under her student loans and maintain a minimal standard of living."

The Hill case is probably most significant as another case in which a bankruptcy judge refused to adopt ECMC's tiresome argument that all student-loan debtors should be placed in income-based repayment plans as an alternative to bankruptcy relief.  Judge Sigler identified the fundamental flaw in ECMC's argument, which is this: Debtors so destitute that they are required to make zero-dollar payments on their student loans clearly meet the first criterion for student-loan relief under Brunner. They cannot maintain a minimal lifestyle and pay off their student loans.