Law Commons^™

A No-Contest Discharge For Uncollectible Student Loans, Brook E. Gotberg, Matthew Bruckner, Dalie Jimenez, Chrystin Ondersma

Faculty Publications

Over forty-four million Americans owe more than $1.6 trillion in student loan debt. This debt is nearly impossible to discharge in bankruptcy. Attempting to do so may require costly and contentious litigation with the Department of Education. And because the Department typically fights every case, even initial success can be followed by years of appeals. As a result, few student loan borrowers attempt to discharge their student loan debt in bankruptcy.

In this Article, we call on the Department of Education to develop a set of ten easily ascertainable and verifiable circumstances in which it will not contest a debtor’s …

Bankruptcy And Education, Keith Sharfman

Faculty Publications

(Excerpt)

Bankruptcy law interacts with education law in a number of respects. A bankrupt educational institution loses access to student financial aid, and its accreditation status is excluded from the bankruptcy estate. Actions by accreditation agencies against bankrupt educational institutions are not subject to the automatic stay. And absent a showing of undue hardship, student loans are not dischargeable in bankruptcy.

The exceptional treatment of educational institutions and their students in bankruptcy reflects a fundamental tension between the goals of bankruptcy law on the one hand and education policy on the other. While bankruptcy law generally seeks to maximize value …