Tuesday, July 28, 2020

Rubash v. U.S. Department of Education: 60-year-old law-school graduate unable to shed student debt in bankruptcy

Peter Rubash is a sixty-year-old graduate of Duquesne University School of Law. He practiced law for a time but lost his job and eventually went to work as a project manager for a public agency.

In 2018, Mr. Rubash filed an adversary action in a Pennsylvania bankruptcy court, seeking to discharge approximately $230,000 in student loans. According to a medical expert, Rubash was depressed.

According to the expert, Rubash's "occupational failure as [a] lawyer and his resulting debt have caused, or at the very least, exacerbated his psychological dysfunction." The expert also said that Rubash was underemployed in his present position and was unlikely to obtain "suitable employment consistent with [his] education and past levels of employment" (p. 2).

The U.S. Department of Education opposed Rubash's effort to shed his student-loan debt in bankruptcy. DOE argued that Rubash earned enough money to make payments on his college loans.  The agency
presented a long-term income-based repayment plan (IBR) that would require Rubash to pay $838 a month.

Judge Carlota Bohm, who decided Mr. Rubash's case, agreed with DOE and refused to discharge Rubash's student loans. Rubash earned about $49,000, the judge pointed out, and he received additional income as a consultant.  In Judge Bohm's opinion, Rubash could make payments of $838 a month and still maintain a minimal standard of living. (Judge Bohm's decision did not specify the repayment period--probably 20 or 25 years.)

Judge Bohn justified her decision by citing ample citations to case law. But let's think a little bit more about Mr. Rubash's situation.

Rubash obtained his bachelor's degree 38 years ago and probably got his law degree within three or four years after getting his undergraduate degree.  He's 60 years old now.  If he enters into a 25-year IBR plan, he will be 85 before he finishes his repayment obligations.  That means he will make his last student-loan payment 63 years after he graduated from college.

Somehow, our society has got to come to terms with the fact that millions of people have taken out student loans to obtain undergraduate degrees and professional degrees that are not worth what they paid for them. I don't know what Mr. Rubash paid to attend law school at Duquesne, but today the tuition price is $46,000 a year.

 Thousands of law-school graduates have taken out six-figure loans to get J.D. degrees only to enter a saturated job market.  We've got to come up with a better way of addressing this problem than 25-year income-based repayment plans.

References

Rubash v. U.S. Department of Education, Bankruptcy No. 18-20449 CMBA Adversary No. 18-2028-CMB, 2020 WL 2554234 (Bankr. W. D. Pa. May 19, 2020).




2 comments:

  1. Thanks for posting.

    Just curious: can you tell who owns this loan? I assume from the dates it was a set of private loans.

    Legally speaking, how does the DOE get involved in these loans? Are they bound to guarantee the loan if it goes unpaid?

    Finally,why did the DOE not offer a repayment plan similar to what most debtors can obtain.... i.e, 15% of income above the poverty level. (in this case that would yield about $450 a month)

    thanks

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  2. Hi, Bob.

    Since the Department of Education is a party to the litigation, it has to be a federal loan. And yes, DOE guarantees their federal loans.

    DOE did offer a long-term repayment plan of some kind, although the judge did not specify the length of the plan or the interest rate. Judges who rule sympathetically in cases like this generally do the math, which always reveals that people who are put in long-term income-based repayment plans (IBRs) never pay off their loans because the interest keeps accruing. Thanks for writing. Richard

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