The House of Delegates for the American Bar Association recently passed Resolution 512 urging Congress to amend the Bankruptcy Code to permit student loans to be discharged in bankruptcy without proving “undue hardship” as is currently required. The resolution was co-sponsored by the Young Lawyers Division, the Law Student Division and the Standing Committee on Paralegals. The Young Lawyers Division submitted a report in support of the resolution (the “YLD Report”) which discussed the history of student loans and borrowers’ ability to discharge them bankruptcy.
There is no question discharging student debt in bankruptcy is a hot political topic worthy of ABA attention. The Biden administration has forgiven over $9 billion in student debt and many congressional leaders call for complete student debt forgiveness. Since March 27, 2020, pursuant to the Coronavirus Aid, Relief and Economic Security Act, repayment of federal loans has been frozen. The freeze was extended several times and will not expire until at least January 31, 2022. We also wrote about the recent Second Circuit decision—Homaidan v. Sallie Mae, Inc.—which will make it easier for borrowers to discharge certain student debt in bankruptcy, even under existing law. The YLD Report explains how young lawyers are particularly affected: the average debt for law school graduates is around $145,000 (although the default rate for law school grads is traditionally better than the pre-freeze 11% figure for all student loan borrowers).
Continue Reading Discharging Student Loan Debt: The ABA Takes a Stand