Blog

Browse All Blog Topics

Supreme Court Considers Student Loan Bankruptcy Case

The U.S. Supreme Court began hearing arguments today on the intricacies of one student's 20-year-old debt that could change the way bankruptcy law handles student loan cases.

The case, United Student Aid Funds Inc. v Espinosa, goes back to 1992, when Francisco Espinosa, a technical school graduate, filed for Chapter 13 bankruptcy. Espinosa by then owed nearly $18,000 in not only student loans taken out four years earlier, but interest on those loans to lender United Student Aid Funds Inc. He filed for bankruptcy to relieve him not of his loan debt, but the nearly $5,000 in interest accrued on the $13,000 he initially borrowed. Thinking he had reached an agreement with his lender, Espinosa eventually paid off the principal on the loan over a five-year period.

Several years later, however, he received notice from his lender that he still owed the remaining interest. The lender claimed Espinosa had not sufficiently shown "undue hardship," a requirement under bankruptcy law for students to qualify their student loans under Chapter 13. Espinosa says he fell on hard times when the hours for his baggage handler job through airline America West were cut, and he was unable to find a job that fit his degree in computer drafting and design through the technical college.

That's when the legal battle began. Espinosa won on the bankruptcy court level, but the district courts ruled in favor of the lender and demanded a hearing to show whether Espinosa met the criteria for a bankruptcy filing. The Ninth Circuit Court of Appeals ruled that it was too late for the lender to challenge the filing, which then landed the case in the U.S. Supreme Court.

An article in the Chronicle of Higher Education previewing the case this week looked at the implications of the court's eventual ruling. If the Supreme Court overturns the last appeals court's decision, lenders could feel free to collect back interest on student loans that have already been approved for Chapter 13. If the Supreme Court rules in favor of Espinosa, lenders could be open to abuse by borrowers taking advantage of the law to get out of their student loan repayments. The article suggests that the Court should consider redefining the "undue hardship" criteria to make it easier for judges to apply that criteria across the board, as many say it is already too subjective.

The case is an important one for students, especially in a difficult economic time when college students are not only borrowing more, but having a tougher time finding jobs to make payments on their student loan debt. Student loan default rates are also on the rise for both federal and private loans as tuitions only continue to rise. If you're worried about the amount of debt you'll accrue going to that dream school, consider all of your options. Factor college cost into your college search, and make sure you have a good idea of financial aid and scholarship money available to you before taking out student loans.

Going to college doesn't have to break the bank or saddle you with tens of thousands of dollars in student loan debt. Check out the Scholarships.com free college scholarship search where you’ll discover you qualify for hundreds of thousands of dollars in scholarships in just a few minutes, then apply and win! It’s that easy!

Discuss

Share your thoughts and perhaps thousands of students will benefit from your unique insight on the subject!



If you can read this, don't touch the following fields


 

Most Shared Articles

Fighting crime is no easy task and is not meant for everyone. Careers in criminal justice aren't limited to police officers. You can study to be a criminal law paralegal, a crime lab analyst or even work for homeland security. If you plan to take this route, don't forget to apply for these solid scholarships to reduce debt while also doing your part to reduce crime: [...]

0 months ago 0 comments Read More

Due to Oregon's $1.8 billion budget crisis, public university leaders want funding reallocated from the Promise program to the state's need-based grant, which is awarded to low-income students who attend Oregon's public universities. [...]

0 months ago 0 comments Read More

The traditional college route isn't the best choice for everyone. There are ample scholarship opportunities for students who opt for a vocational career, whether it be in the plumbing, carpentry, electrical, firefighting or many others. If you want to learn or hone a specific skill as an alternative to attending a more traditional four-year college, take some time to consider these vocational scholarship opportunities: [...]

0 months ago 0 comments Read More

Wheaton College, a liberal arts college in Massachusetts, has created a refugee scholarship following the POTUS' immigration order in an effort to preserve their "foreign-born community." Another scholarship called The Privilege Grant, was recently created and is exclusively for white men "pursuing college on equal footing with their female, queer and ethnic minority classmates." [...]

0 months ago 14 comments Read More

February is Black History Month, or National African-American History Month, and is annually spent celebrating the achievements and contributions of black Americans in U.S. history. MLK had a dream - what is yours? Ours is helping you go to college with as little debt as possible. If that's your dream, check out these Black History Month-inspired scholarships: [...]

0 months ago 1 comments Read More

Living the college life has gotten way more expensive since 1980, and not including just tuition and fees. While many types tuition freezes, government tuition-free programs, scholarships, and grants help foot the tuition bill, housing and food remain uncovered, according to MarketWatch. [...]

1 months ago 2 comments Read More

The NFL Super Bowl is right around the corner, and while you may be enjoying the highly entertaining commercials or half-time show, we’ve compiled a list of football scholarships for those of you who one day aspire to play in the Super Bowl. If you have a passion for the game and wish to play at the collegiate level and beyond, check out these award opportunities and get paid to play: [...]

1 months ago 0 comments Read More

At elite colleges, more students come from the top 1 percent than the entire bottom 60 percent, according to a new study. While roughly one in four of the wealthiest students attend elite schools, including five Ivy League schools, graduating college helps "level the playing field for students of all socioeconomic backgrounds," according to Inside Higher Ed. [...]

1 months ago 0 comments Read More

Not all scholarships are awarded to the best writers with the strongest essays. So whether you're too busy writing other essays for school or simply not the best at literary composition, there are scholarship providers that dole out funds for unique hobbies or skill sets; or even for simply entering a contest. Check out these no-essay (or essay-alternative) awards for a chance to fund your college education:: [...]

1 months ago 3 comments Read More