This Man Got $221,000 Of Student Loans Discharged In Bankruptcy

January 16, 2020

By Zack Friedman, Forbes

Getty

Can you now discharge your student loans in bankruptcy?

Here’s what you need to know.

Student Loans: Bankruptcy

A Navy veteran will have $220,000 of his student loans discharged, even though he is not unemployable, not disabled or wasn’t defrauded. A U.S. bankruptcy judge in New York, Cecilia G. Morris, ruled that Kevin J. Rosenberg will not have to repay his student loan debt because it will impose an undue financial hardship.

According the Wall Street Journal, Rosenberg borrowed $116,500 of student loans between 1993 and 2004 to earn a bachelor’s degree from the University of Arizona and a law degree from Cardozo Law School at Yeshiva University. He filed for Chapter 7 bankruptcy in 2018 and asked the court last June to discharge his student loan debt, which had grown to $221,400, including interest. At the time of filing, Rosenberg’s annual salary was $37,600, and after living and debt expenses, his monthly net loss was $1,500.

Traditionally, unlike mortgages or credit card debt, student loans cannot be discharged in bankruptcy. There are exceptions, however, namely if certain conditions regarding financial hardship are met.

The Brunner Test: Financial Hardship

Those conditions are reflected in the Brunner test, which is the legal test in all circuit courts, except the 8th circuit and 1st circuit. The 8th circuit uses a totality of circumstances, which is similar to Brunner, while the 1st circuit has yet to declare a standard.

In plain English, the Brunner standard says:

  1. the borrower has extenuating circumstances creating a hardship;
  2. those circumstances are likely to continue for a term of the loan; and
  3. the borrower has made good faith attempts to repay the loan. (The borrower does not actually have to make payments, but merely attempt to make payments – such as try to find a workable payment plan.)

There are variances across federal districts, but that’s the basic framework. To discharge student loans through bankruptcy, an Adversary Proceeding (a lawsuit within bankruptcy court) must be filed, where a debtor claims that paying the student loan would create an undue hardship for the debtor.

So, Can You Now Discharge Student Loans In Bankruptcy?

This is only one legal ruling. That said, federal judges and Democrat and Republican members of Congress are open to changing the law to make it easier for borrowers to discharge their student loans in bankruptcy. While these tactics may be welcomed by some student loan borrowers, critics may question whether judges should actively try to circumvent the existing law (suggesting that Congress, and not judges, should make the law.

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https://www.forbes.com/sites/zackfriedman/2020/01/10/student-loans-bankruptcy/

In The News: At HBCUs, crushing student loan debt is a symptom of even bigger problems

June 11, 2019

By Dartunorro Clark

MSNBC News

When Michael Sorrell became president of Paul Quinn College 12 years ago, he assessed the dire situation his school was in and made a bold choice: No more football.

“I mean, we’re in Texas. We’re an HBCU in Texas,” Sorrell said. “I got a little flak for that, OK?”

But to him, eliminating the program was the only way the historically black college in Dallas, which was founded in 1872 by a group of preachers from the African Methodist Episcopal Church to educate freed slaves and their children, could get back on track.

Football had cost the school roughly $600,000 to $1 million a year, he said, and scholarships went mainly to the players. Meanwhile, other students struggled, faculty and staff members were leaving, and buildings had fallen into disrepair.

“We were roughly 18 months to 24 months away from closing. We had financial problems. We had academic problems. We had morale problems, and it was the prototypical scenario for an institution that had been struggling for a long time and the end of the road was coming,” he told NBC News in a phone interview.

The challenges Paul Quinn College faced are not unique, experts said, even if its solution was one of a kind.

Click link below to read more:

https://www.nbcnews.com/politics/politics-news/hbcus-crushing-student-loan-debt-symptom-even-bigger-problems-n1014171

 

In the News: Education company Chegg is helping pay down its employees’ student loan debt. ‘They are creating value for us’

June 7, 2019

— CNBC’s Annie Nova contributed to this report.

https://www.cnbc.com/amp/2019/06/06/chegg-is-helping-pay-down-its-employees-student-loan-debt.html

Chegg has a new plan to help its employees deal with their student loans.

And its CEO wants other companies to follow Chegg’s lead.

The student-connected learning platform announced a new program Thursday that will give its entry- through manager-level workers up to $5,000 a year, if they have been with the company at least two years. Director- or vice president-level employees can get up to $3,000 annually to help pay down their student loan debt.

“Corporations need to play a role here,” Chegg CEO Dan Rosensweig told CNBC’s “Closing Bell” on Thursday.

“We are the beneficiaries of those people who have gotten an education — doesn’t matter if it is four year or two year or even if they completed it,” he added. “If they borrowed money and they are creating value for us, we want to help them.”

Student loan debt has hit record levels, with borrowers owing a total of $1.5 trillion. About 7 in 10 college graduates have education debt.

“We are taking our most vulnerable, least financially stable and we’re creating a burden on them that is unsustainable.” -Dan Rosensweig, Chegg CEO

Many also are unable to find ways to pay their bills. More than 1 million borrowers go into default each year. By 2023, its projected that 40% of borrowers may default on their student loans.

Chegg’s latest benefit is in addition to the $1,000 cash that its employees with student debt already receive each year. To pay for the program, called Equity for Education, Chegg created an equity pool from its existing stock.

“We’ve got a mess and it’s probably the biggest economic crisis facing this country. And we don’t deal enough with it,” Rosensweig said.

The Santa Clara, California-based company certainly isn’t the only business helping workers with some sort of student loan debt assistance.

Student loan debt

Getty Images

Last year, Fidelity began to offer companies a way to contribute to their employees’ education debt with its Student Debt Employer Contribution program. It now has more than 65 companies that are offering, or in the process of offering, the benefit.

“A growing number of companies are increasingly aware that helping their employees take on the issue of student debt can help improve their overall financial wellness, which can in turn have a positive impact from a business perspective in a host of ways,” said Asha Srikantiah, head of Fidelity’s Student Debt Employer Contribution.

In fact, Fidelity has already seen an improvement in attracting and keeping top talent since it started offering the program to its own employees in 2016.

“For eligible Fidelity employees from 2016-2018, we’ve seen an approximate 75% reduction in turnover in the first year of program participation,” Srikantiah said. “And, according to a recent internal survey, it’s among the top two reasons people decided to join Fidelity.”

Still, the companies that offer this type of benefit remain the minority. About 4% did so in 2018, according to the Society for Human Resource Management.

Chegg’s CEO said his company thought long and hard about how to come up with a program that other companies can copy.

“We wanted to see if we could set an example and create a dialogue,” Rosensweig said.

He’s also hoping the government and colleges take notice of Chegg’s plan and do their part to help with the crisis.

“We are taking our most vulnerable, least financially stable and we’re creating a burden on them that is unsustainable,” Rosensweig said.

 

In The News: The average millennial has a net worth of $8,000. That’s far less than previous generations.

June 5, 2019
By Abha Bhattarai for Washington Post

Millennials are doing far worse financially than generations before them, with student loans, rising rents and higher health-care costs pushing the average net worth below $8,000, a new study shows.

The net worth of Americans aged 18 to 35 has dropped 34 percent since 1996, according to research released Thursday by Deloitte, the accounting and professional services giant. This demographic is paying more for education and such basics as food and transportation while incomes have largely flatlined.

“The vast majority of consumers are under tremendous financial pressure,” said Kasey M. Lobaugh, Deloitte’s chief retail innovation officer and lead author of the study. “That is particularly true for low-income Americans and millennials.”

The growing gap between the nation’s wealthiest residents and everybody else, he said, is affecting the way consumers spend…

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https://www.washingtonpost.com/business/2019/05/31/millennials-have-an-average-net-worth-thats-significantly-less-than-previous-generations/?noredirect=on&utm_term=.269c9363005d