As John Lennon famously observed, "Life is what happens to you while you are busy making other plans." Certainly, Mr. Shenk, a military veteran, had other plans for his life other than filing for bankruptcy at the age of 59 in an effort to discharge $110,000 in student loans.
Timothy Shenk served 13 years in the U.S. Army (infantryman in the 82nd Airborne Division). He then enlisted in the National Guard in order to obtain the 20 years of military service that would make him eligible for full retirement. That was a good plan.
Shenk also planned to become a teacher and he obtained a bachelor's degree from SUNY Cortland in 1999. He then worked on a master's degree program in Adolescent Education, and he completed all the course work to obtain his degree. That also was a good plan.
Unfortunately, Shenk had unpaid student loans, and SUNY Cortland refused to award him his diploma. In addition, the university had a five-year time frame to meet program requirements and that time period elapsed years ago. Consequently, Mr. Shenk will never receive the degree he worked for, even though he met all program requirements.
Shenk married when he was a young man and he and his wife had four children. But the marriage ended in divorce, and he became liable for public assistance payments made to his ex-wife. By the time he filed for bankruptcy, he had paid off most of that obligation, which is commendable.
Bankruptcy Judge Margaret Cangilos-Ruiz expressed some sympathy for Mr. Shenk. She pointed out that his graduate studies were interrupted because the State of New York called him back for active military service after the terrorist attack on the World Trade Center in 2001. "The bitter irony is that when ordered by the Governor, [Shenk] assisted New York State at a time of dire need only later to have the State refuse to confer the degree that may have put him on a financial path to pay what he owed."
Nevertheless, Judge Cangilos-Ruiz denied Shenk's request for a student-loan discharge on the grounds that he did not meet the stringent standards of the three-part Brunner test. He was unemployed at the time of the bankruptcy proceedings and he could not pay back his student loans and maintain a minimal standard of living. Thus he met Brunner's first requirement. But the judge believed Shenk's financial circumstances would likely improve. He was employable, the judge pointed out, and he would soon be eligible for a small military pension and Social Security benefits. The judge also said that Shenk failed Brunner's good-faith test because he had made no payments on his student loans over a number of years.
I think Judge Cangilos-Ruiz erred when she refused to discharge Mr. Shenk's student loans. First of all, universities should not be allowed to withhold a diploma simply because the would-be graduate has unpaid student loans. Such a policy amounts to putting student borrowers in debtor's prison--they cannot pay back their debts because their credentials are being withheld.
Moreover, Judge Cangilos-Ruiz denied Mr. Shenk a discharge partly due to the fact that he would eventually receive Social Security benefits and a modest military pension. In my view, no one who is nearing retirement age should be required to devote one penny of meager retirement income to paying back student loans.
In short, the equities of this case favored Mr. Shenk. Perhaps he made some mistakes in planning his finances but he served his country for 20 years in the U.S. military and he worked to obtain a graduate degree that his university refused to give him.
In any event, Mr. Shenk will probably never be able to repay $110,000 in student-loan debt. His only recourse now is to sign up for a long-term income-based repayment plan that could stretch out for as long as 25 years--when he will be 85 years old!
Isn't it ironic that presidential candidates are calling for a college education to be free to everyone while a man who served his country for 20 years is burdened by enormous student-loan debt? Thanks for your service, Mr. Shenk.
Shenk v. U.S. Department of Education, 603 B.R. 671 (Bankr. N.D.N.Y. 2019).