- July 17, 2015
- Thomas Adam
- Student Loans
Student loan debt remains a huge problem in the United States. It seems like there is a near endless stream of stories coming out about students who are unable to obtain employment at a level that will allow them to make substantial payments towards their student loans.
These students are left with the daunting realization that they will be making student loan debt payments for life. And many still won’t ultimately pay off all of their debt. This is more than an anecdote, statistics have show that the number of seniors with student loan debt has greatly increased over the past 10 years. Student loan debt amount seniors was reported at $58 billion in 2014. Compare that to an estimated $6 billion in 2004. Inflation doesn’t come close to accounting for that more than 9 fold increase.
Legislatures Initiate Student Loan Debt Bills
One of the most unfortunate aspects of student debt is that there are very few ways to get out of it. Student loan debt is typically dischargeable in bankruptcy only where very specific circumstances are met, falling into two broad categories, an undue hardship (11 USC 523(a)(8)) faced by the debtor or an unqualified educational institute loan. Evidence of just how difficult the undue burden standard is can be found in a recent profile of a disabled woman living below the poverty line (making around $10,000 annually) whose request to discharge her approximately $37,000 in student loans was denied by a bankruptcy court.
As noted in earlier blogs, there has been an increasingly loud push to allow student loans to be discharged during bankruptcy proceedings. Earlier this year a Senate introduced a bill that would allow private (not federal) loans to be discharged in bankruptcy. The house also introduced a bill this year with the same goal but without the exception for federal loans. Both bills have been referred to committees.
Corinthian Colleges, Inc. (CCI) Shuts the Rest of Its Doors
The other more specific student loan issue is the future of student loan debt holders who attended Corinthian Colleges, Inc. (CCI) was a for profit educational company that owned and operated three groups of colleges across the country: Everest, Herald, and WyoTech. Everest is the name that most Floridians will recognize.
Public awareness of CCI’s downfall began in 2014 when it failed to provide records to the Department of Education, records that it was required by law to keep. The records non-compliance was just the beginning and a flood of alleged wrongdoing began to come to light. To date, almost half of the states’ attorneys general have filed lawsuits against CCI and many federal agencies (think SEC, Department of Justice) are investigating. By April of this year, CCI closed all of its campuses and filed for bankruptcy.
CCI was a very large organization, leaving in it’s wake a mass of students with debt taken out to pay for their CCI education. The US Education Department estimates that in recent years alone more than $3 billion in federal loans were taken out to pay for CCI educations. Remember: that’s recent years and doesn’t include private student loans. Current CCI students with federal student loan debt have two options: transfer their educational credits and finish their degree at a comparable institution or apply for a student loan discharge.
The having to apply part is disturbing many. With the mountain of evidence against CCI for a variety of wrongdoings and the closing of all of CCI’s campuses, many are advocating for an across the board forgiveness and a group of students even requested a court ordered stay on collecting CCI related loans.
The Law on Student Debt Continues to Evolve
We are optimistic that the continued attention on the student loan and CCi crises will push legislatures and agencies to make the right call and adopt more student friendly laws and regulations. In the interim, student loans remain a tricky area. Contact Adam Law Group if you’d like to discuss the options that may be available to you for alleviating your student loan burden.