2020 Student Loan Cases May Set New Precedent for Future Discharges

2020 Student Loan Cases May Set New Precedent for Future Discharges

(RepublicanNews.org) – Student loans reached an all-time high in 2019, with the average one topping $30,000 for the first time in at least 10 years. According to the Federal Reserve, the total national debt associated with student loans reached nearly $1.6 trillion mid-year 2019.

Additionally, about 20% of students taking out educational loans have delinquent payments. However, there may be help around the corner for students in the form of recent court cases discharging those debts.

Traditionally, canceling student debt through bankruptcy courts requires meeting a high legal standard and can be quite expensive. However, three recent court rulings indicate relief for students overburdened with loan obligations could become easier in the future.

Bankruptcy Courts Weigh In

Two New York bankruptcy courts discharged thousands of dollars in student loans in 2020. The first case eliminated about $200,000 of student loan debt for an individual in January. The second one enforced a prior removal of nearly half a million dollars of federal student loans for a student. A third case removed about $200,000 in debt for a couple who received a total of 11 private educational loans between the two of them.

The National Consumer Law Center, a nonprofit organization, specializing in issues affecting low-income individuals, told reporters those court decisions could set a precedent for future cases involving student debt.

According to them, most lawyers thought discharging educational loans in bankruptcy courts was next to impossible. However, with these new cases on the books, it’s worth taking a “fresh look” at using them moving forward.

Numerous challenges exist for individuals hoping to get rid of the debt associated with their education. For example, federal bankruptcy court hearings are expensive, costing thousands of dollars for filing fees, court costs, and attorney compensation. Additionally, bankruptcy courts are notorious for placing stringent standards on people trying to discharge a debt.

However, these recent cases offer hope for future litigants, and some politicians have discussed the need for legislative reform regarding student loans. Time will tell what the future holds for loan recipients, but at least there is now some window of hope.

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