“A noose around her economic neck”: A young lawyer wins a partial discharge of her private student loans

Nitcher v. National Collegiate Student Loan Trust, decided a few days ago, is another story of a heavily indebted lawyer who attempted to have her student loans discharged in bankruptcy. 

Leslie Taiko Nitcher is a 38-year-old attorney who graduated from Willamette University School of Law and passed the Oregon State Bar in 2008. She found it difficult to find steady work, but she finally landed a law job that paid her $69,000 in 2018.

Nitcher took out federal student loans and private student loans while she was in school. Although she made some payments on her student-loan debt, she owed a quarter of a million dollars on her loans ten years after she graduated. About $200,000 of that debt consisted of federal student loans, which she managed by enrolling in an income-based repayment plan (REPAYE). She pays $479 a month under that plan, which obligates her to make monthly payments for 25 years.

Nitcher also owed $51,000 in private student loans and she attempted to discharge these loans in bankruptcy. Bankruptcy Judge Peter C. McKittrick was sympathetic to her plight and granted Nitcher a partial discharge that requires her to pay only $16,500 on that debt, payable in 110 monthly payments.

Here is how Judge McKittrick began his opinion :

This adversary proceeding tells a far too common story of the plight of a professional swallowed by massive student loan debt, much of which she has no hope of repaying during her lifetime. In 2005, when Leslie Nitcher . . . enrolled in law school, it was with the hope and expectation her advanced degree would lead to a legal career at a level of compensation commensurate with the standard of living that lawyers historically have enjoyed. Instead, she faced a bleak job market when she graduated from law school in 2008. 

The question before the court, Judge McKittrick wrote, was "to what extent her student loan debt will remain a noose around her economic neck for the remainder of her economically productive years."

Judge McKittrick finished his opinion by explaining why he ruled as he did. "The reason I have concluded that the Student Loans should be discharged is largely because Nitcher cannot survive if [her private-loan creditor] garnishes her wages." 

The Nitcher decision is important because it is one of a growing number of bankruptcy-court decisions in which judges acknowledge the heavy burden that many law graduates face due to the tremendous amount of student-loan debt they accumulate during their studies. In many instances, they simply cannot pay it back.

As Judge McKittrick put the matter, Nitcher had “a noose around her economic neck." Unfortunately, Nitcher is still obligated to make monthly payments of $479 a month under REPAYE, which will not terminate until she is in her 60s. Thus, Judge McKittrick loosened the noose around Ms. Nitcher's neck, but she will continue standing on the scaffold for the next quarter of a century.

References

Nitcher v. National Collegiate Student Loan Trust, Bankr. Casse No. 18-31729-pem7 (August 23, 2019).