NACBA Response by President Ed Boltz to U.S. News Article “Debunking the Student Loan Bankruptcy Myth”

US News Op-Ed Posted HERE.

To the Editor:

More proof that if it sounds too good to be true, it usually is: Contrary to what you may read, there are not “a lot” of instances in which students who are savvy enough to ask to discharge their student loan debts are allowed to do so. (“Debunking the Student Loan Bankruptcy Myth,” August 13, 2014)

In reality, the United States is crippled with what has been termed a “student loan debt bomb.” Americans have accumulated more than $1.2 trillion in student loan debt, exceeding even the level of credit card debt in our nation. Because federal law treats student debt as non-dischargeable in bankruptcy proceedings, borrowers can be burdened with this debt for a lifetime even if they are unable to repay.

Federal law does provide that bankruptcy discharge is available for student loans in cases of “undue hardship.” But there’s a big gap between what is theoretically possible and what happens in the real world. The path to an undue hardship discharge is often blocked by U.S. Department of Education contractors, which aggressively challenge debtors’ efforts to show undue hardship. Too often, what we see in bankruptcy courts is federal education contractors using their legal muscle and ability to drag things out in order to crush hardship cases.

The U.S. Department of Education needs to take charge of the situation and make it clear that the over-the-top hardball tactics of its contractors are out of line. Students, parents, educators, lawmakers and other concerned citizens should encourage Congress to restore meaningful and workable bankruptcy protections for student loans, so that those in real need are able to get a fresh start, rather than being devastated for life by insurmountable student loan debt.

Edward Boltz
President, National Association of Consumer Bankruptcy Attorneys
Raleigh, North Carolina